How Google and Facebook control the advertising industry and what we should do about it
Facebook thrives on making negative headlines. The social network is facing increasing skepticism about its position as the market leader as well as allegations about its improper collection and use of data. When it comes to data protection, Germany usually leads the way. However, in the wake of the recent Cambridge Analytica revelations, the debate is gaining pace all over the world. And Opinary’s CEO and Co-Founder Cornelius Frey is not surprised:
“The current accusations are not news. It just became more apparent how an over-centralized channel like Facebook is not suitable as a primary access point to users, neither for brands nor for publishers.”
Following the accusations, Commerzbank and Mozilla reacted by suspending their ad campaigns on Facebook. But what’s their alternative? Pushing campaigns on Google instead? These days, advertisers are painfully aware of how much Google and Facebook control the advertising industry. That is why effective alternatives are in such high demand at the moment.
Next to Amazon and Apple, Google and Facebook are dominating huge areas of the digital market. Whether you want to search the internet or send an email, stream a video or listen to music, use social media or shop online, it’s almost impossible to bypass Google and Facebook. In 2016, Google and Facebook realized about 76% of online advertising revenue worldwide (excluding China of course). Experts talk about a duopoly – especially since “99% of industry growth was attributable to the two companies during 2016,” according to Pivotal’s Senior Analyst Brian Wieser. Google and Facebook’s bargaining power and solvency are two sides of the same coin. In this cut-throat competition, they have never, until now, drawn the short straw. And in the face of essentially all-powerful adversaries, new tech barely gets a look in and real alternatives are hard to come by.
The negative consequences of duopolistic markets aren’t dissimilar to those of a monopoly. Hence, the digital advertising market is neither open nor competitive. Google and Facebook make profits by being virtually the only options. Prices are rarely negotiable and in terms of quality, advertisers can’t do anything but accept what they are offered. They don’t have any say.
Whole business ideas are based on Google and Facebook. And it’s not an isolated case when a business model becomes obsolete from one day to the other. Facebook’s new branded content guidelines proved this just recently. This means that it’s not only brands that can find themselves in a delicate situation but the media runs risk of becoming dependent too. As soon as publishers are unable to finance their work adequately through advertising revenue from the walled gardens, they may lack proper alternatives. And when the independent media is in danger, liberal democracy hangs in the balance.
Brands and publishers should form strategic partnerships and invest more in generating their own data, reducing dependency on data from Google and Facebook.
Brands and publishers should support new platforms and pure technology providers who focus on tech solutions and don’t occupy every interface that’s critical for advertisers’ success.
With Facebook’s role in the recent data breach still under investigation, advertisers are closely monitoring the effects of users leaving the social network. A mass exodus of users might leave a long-lasting dent in Facebook’s market power. If these recent events are ignored, there are troubling times ahead for advertisers and more importantly, data protection.
Politicians need to cooperate beyond national borders in order to put a stop to tax avoidance. Currently, huge, international players like Google and Facebook are able to shift their profits and decrease their tax burden immensely compared to smaller, local companies.
Users need to insist on stronger data protection and limit advertising possibilities for Facebook. Users should be empowered to refuse the unrestricted collection of data from third-party sources which is then merged with their Facebook account.
We have to break the mould. We need to diversify digital sources of revenue and finally stop allowing two companies to control a whole industry. “Facebook has had its day as a cure-all,” says Soheil Dastyari, CEO of Territory, a marketing leader in content communication. “People especially expect big brands to offer a wide range of differentiated customer approaches.” It is time for change!