Friday, September 9, 2016

(The Big Disrupt) Google/Facebook: Why Google's and Facebook grip over the digital ad market is going to be hard to loosen

In a world increasingly dominated by a handful of powerful and deep pocketed corporations, there's a strong arguments that Google's and Facebook's duopoly has the greatest implications for everybody    

The implications of Google's and Facebook's ad market dominance are far and wide ranging particularly for publishers as Google and Facebook end up sucking most the new and existing value in the digital ad market leaving publishers fight each other over the scraps with ad tech companies and new players such as Verizon with recent purchase of former search giants Yahoo. 

The main and frankly dangerous implications of the Google and Facebook duopoly is that with their dominant market position, Publishers have no choice but turn to either company to retrieve ad dollars they already lost to google and Facebook in the marketplace. Even more concerning is that both Google and Facebook are looking to wrest more control over the content produced by publisher through initiatives. Facebook recently opened up their instant articles to everyone which allows content creators to post content on the platform directly in a ploy to stop users leaving their site which affects Facebook ability to monetise their data. 

Facebook's ploy has worked a treat as a recent study carried out by the Reuters Institute for the Study of Journalism revealed that over 50% "of all web users use social media for news each week" as both Facebook and Google become "destinations in their own right" 1    
This trend looks set to continue with the rise of ad blocking pushing publishers further into the thrall of the Google and Facebook duopoly. While ad blocking effects both Google and Facebook, the use of ad blockers can be what brings publishers to their knees as it affects their ability to monetise their inventory. Unless the Facebook/Google falls ( which is hard to even imagine), the near and long term future for the publishing industry looks bleak to say the least. However, there are a growing of threats developing to bring the great Google/Facebook duopoly crashing down. 

The number of threats to Google's and Facebook's dominance of the digital ad market are myriad but the most concerning the duopoly by far is the rise of ad blocking. Both companies have admitted the popularity of ad blockers is a problem and also that ad blocking can potentially affect their future ad blocking. Google has taken more drastic steps than Facebook in combating ad blockers with the Mountain View based company hired a 1,000 strong staff to take down 780 million crappy ads last year 2 

Google have also put a lot pressure over the last few years on webmasters to improve their sites from threatening them lower page rankings if they don't make their sites mobile friendly in it's tussle with Facebook for mobile ad dollars but should consumers take to ad blocking at the rate they have on desktops, Google's search ad advertising empire could start to crumble fast. 

Facebook have also taken action with the Menlo Park based company banning the use of ad blockers as Facebook looks to protect its ad revenue which represents 96% of their revenues in total 3. Google are just as reliant on ads as Facebook if not even more which makes ad blocking a serious threat to the duopoly. 

However, despite much of the press donated to the rise of ad blocking and its effects on the digital ad market, the biggest threat to the Google/Facebook duopoly is Apple and its quest to hobble Google by any means necessary. Apple, like Facebook, competes with Google in a number of markets but where  they compete the fiercest in the mobile Os market which is dominated by Google's Os Android which has a market share of just over 80% 4. However, Apple is one part of a long term smartphone duopoly with Samsung still shipping millions of iPhones and over a billion since the first iPhone was released ten years ago 5. 

While the popularity of the iPhone has waned of late sales wise, Apple's dominant position in the smartphone market has allowed Apple to create a large mobile app store which aggressively competes with Google own mobile app store (Google Play) for app developers to sell their apps on their platform despite iOs's (Apple's mobile Os) weak market position in comparison to Android. 

The truly brutal competition between the two companies spawned probably the blatant attempt  to destroy a competitor as Apple spitefully opened their app store to ad blockers last year and even went as far remove ad blocker that affected, you guessed it, Facebook 6. While this was clear shot in Google's direction, the group most affected by their decision was publishers. If it wasn't bad enough that Google inexplicably allows ad blockers in it's own app store, Apple exposing its large user base to ad blocking apps put publishers under a great of pressure as ad blockers continue to eat into their ad revenues.       

Google definitely felt the shot sent by Apple as they missed Q1 exceptions earlier this year 7. Despite having a better relationship with Apple, Facebook have also been feeling the heat of late as the company has been willing to admit that ad blockers pose a threat to future earnings despite its attempts to deal with the ad blocking phenomenon. 

However, despite the recent challenges offered by Apple and ad blocking, both Google and Facebook are going to be quite difficult to uproot from their shared perches in the digital ad market.

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