The field of digital marketing is dominated by two Silicon Valley superpowers: Facebook Inc and Alphabet Inc, the latter of which controls Google and a family of other companies including YouTube.
Google and Facebook, which also controls Instagram, both have enormous masses of users and data. That gives them an advantage in the online advertising market since they can gather data about their users and deploy targeted ads to maximize users’ clicks and their own revenue.
Independent online advertising-focused companies have found it difficult to wrest market control from Facebook and Google. Although networks and service providers such as Verizon have tried to gain a foothold in mobile advertising, the two superpowers remain dominant.
In fact, Facebook and Google are so completely dominant that the research firm eMarketer predicts this year the two will take in 60 percent of revenue in the United States, and about half worldwide. (Reuters)
In the last quarter, both Facebook and Google proved enormously profitable. Each generated billions in profits.
Brian Wieser, an analyst at Pivotal Research, claims that digital marketing is approaching a saturation point, past which point growth will slow and revenues will settle. Although Facebook and Google are experiencing quick growth in the market now, there are limits to the growth of the market itself. Wieser worries that the investment community has not fully appreciated this prediction.
In the past month, a group of news organizations banded together to lobby to be able to negotiate jointly when dealing with Facebook and Google. Antitrust law normally prohibits this kind of coordination.
Some people are worried that the sheer size of Facebook and Google will reduce marketplace competition and result in a worse result for the consumer. However, Facebook and Google don’t seem yet to have flagrantly violated antitrust law.
Google has previously been at the forefront in monopoly investigations. In Europe, there are multiple investigations pending into Google’s possible monopolistic practices. Last month Google paid the European Union a $2.7 billion antitrust fund. Google had been favoring its own commercial services in search results.
Facebook has previously denied that it is part of a duopoly and claimed that it only controls 5 percent of the advertising market.
However, both companies are clearly gearing up to expand their control of the advertising market, particularly of video advertising. YouTube has released new original programming with big names like Kevin Hart and Ellen Degeneres. Facebook has similarly signed deals with Buzzfeed and Vox Media to release its own video series.
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