Decline of the Open Web’s Digital Advertising Market Share

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The world’s advertising giants are struggling to adapt to a landscape suddenly dominated by the duopoly of Google and Facebook. With Facebook and Google holding 57% of the digital advertising share, it’s beholden on the other players to understand what the walled gardens are doing well, and how that has helped shape consumer expectations around what effective advertising looks like today.

In an interview with the New Yorker from September 2018 Mark Zuckerberg was asked why he felt Facebook, and indeed himself had become the center of constant criticism. To most this is obvious. Article’s like Wired’s ‘The 21 (and counting) biggest Facebook scandals of 2018’ cite damning events like special counsel Robert Mueller highlighting Facebook’s role in enabling Russia to impact the US elections in 2016, and other newsworthy scandals like Cambridge Analytica, the shady London based psychometric firm funded by the Mercer family who accessed up to 87 million users’ data illegally (for which in July 2019 they were hit with a $5bn dollar fine).

The 35-year old in the backyard of his Palo Alto home straightened up, and said: “We’re not—pick your noncontroversial business—selling dog food, although I think that people who do that probably say there is controversy in that, too, but this is an inherently cultural thing,”

The fact of the matter is, he said, that the work Facebook does “[Is] at the intersection of technology and psychology, and it’s very personal.” It is this that makes people feel extremely uncomfortable.

Indeed, Mark Zuckerberg has arguably become one of the best-known entrepreneurs of his generation. Some know him for ‘Bringing the world closer together’, others, (as an AW360 reader, yourself included) for having a hand in revolutionizing digital advertising.

In little over 15 years, Facebook, alongside Google, has come to dominate the advertising industry. At the time of writing the pair shares 56.8% of the global digital advertising ecosystem. The Guardian says “The world has never seen anything like Facebook. The world has never seen anything like Google.” 

The advertising industry was a casualty of their extraordinary growth. But there is much to be learned from their rise.

Early Beginnings

Google’s notoriety stemmed from its product (search) being uniquely placed to accommodate Internet faring consumers entering the conversion phase. This is the early 2000’s, for reference.

Customers had already been through awareness and consideration phases. And were using Google when they were looking to convert. With this knowledge, Google pushes them through the final hoop and charges a premium to businesses through its AdWords service to display products that best match what they are searching at the top of results pages. If the person viewing ends up clicking, Google gets paid.

For marketers, this was great, of course. But less seamless elsewhere. Whilst Google catered well for the conversion phase, upstream was a mess.

Advertisers and platforms across the open web, pre-Facebook, were grappling with poor ad units (banner ads), limited inventory and very rudimentary targeting capabilities.

Ben Thompson, of Stratechery, writes that “Further up the funnel, results were a little more mixed; retargeted ads displayed items you looked at previously helped people shift through the ‘consideration’ phase, in a way that tended to freak people out.”

Seamless advertising experience top to bottom didn’t exist yet.

If you’re not the product you’re the customer 

Data, and unified product ecosystems have been the key to completing the missing parts of the puzzle. Today when you sign up to use just about any service, Facebook and Google included, the ‘Terms & Conditions’ too few people read stipulate that by using their services you are agreeing to willingly handing over lots of personal information. Your interests, search history, location information, anger, hopes, dreams, are commoditizable. It is used to target consumers at every phase of their journey toward a purchase. From awareness, through consideration and conversion.

The instantly classic adage of “Data Is The New Oil”, whilst done to death, is very correct indeed.

Saleem Alhabash, a professor at Michigan State University and the co-director of its Media and Advertising Psychology Lab speaking to Wired said: “It’s the things you interact with, every URL you click on—not only on Facebook but elsewhere on the internet—also how you interact with your friends, all of this gets muddled into making sense of you and providing you with relevant ads.”

The Duopoly’s precision, and capability to truly understand what you may be interested in has solved the effectiveness problem seen in the earlier days of advertising – pre-internet.

Thompson continues: “From awareness through Instagram or YouTube ads to consideration through retargeting and finally to conversion with dynamic product ads on Facebook with dynamic product ads or AdSense, every single stage of the buyer’s journey is covered.”

“Both companies are promising that leveraging their respective platforms will provide benefits on both sides of the ROI equation: the return will be better given the two companies superior targeting capabilities and ability to measure conversion, and the investment will be smaller because you can manage your entire funnel from a single ad-buying interface.”

The Upshot

It’s unsurprising then, that both companies have managed to maintain an iron-grip on the market. But this is far from the end of the story. Others are learning, and recognizing the value of an ecosystem connected end-to-end that efficiently moves people from one end of the funnel to the other.

eMarketer forecasts that the combined U.S. digital advertising market share of the two tech giants will fall this year, shrinking for the first time in the best part of a decade. Rivals like Snap, Amazon and Verizon Media may be far behind, but the power of unified customer experiences from top to bottom, tonnes of data and access to it all through a single interface to provide advertisers with unprecedented control is undoubtedly the path forward.

It is only under these conditions that the open web will be able to offer similar levels of service to advertisers as the Duopoly.

The long and short of it is that efficiency and ROI are directly linked to the ecosystems architected by these tech giants. From YouTube, AdSense, and DoubleClick to Instagram, Facebook Ad Exchange, WhatsApp and more. Replicating the illusion of similar systems, but in an open web environment is the only way advertisers will be able to receive the same level of service at a similar price.

The challenge marketers have next, is maintaining a consistent experience across an ‘open web’ that wasn’t built to be connected in that way.

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