Google & Facebook are creating a duopoly. What does this mean for the UK digital media landscape?
Recent research carried out by leading global digital market research company, EMarketer, shows that 2015 will see Google and Facebook take a combined 51% share of the UK digital advertising market. This will see their combined profit hit over £4bn next year. Google still take the majority of this share, with their search engine still enjoying total domination, with 92% market share. What’s impressive, however, is Facebook’s meteoric rise to revenue forecasts of £743m next year. This represents a 29% year on year growth, which is even more impressive considering that user growth is flat-lining due to saturation, and has risen less than 10% in the last 2 years. All in all, not bad for a company who launched their ad platform just 7 years ago.
How has this happened?
Google’s share of the paid search market still represents the vast majority of the online ad market at £2.37bn. Despite innovation from Yahoo!/Bing Google’s market share has remained un-challenged, and with greater personalisation, a huge growth in mobile search and proliferation of ‘local’ advertising is set to deliver record revenues next year.
In 2015 Facebook looks set to overtake Google as the leader in display advertising. The two giants will tie up 48% of the total display ad market. This shows how the evolution of display advertising has come full circle. From direct individual site buys in the early days of the late 90’s achieving targeting but minimal scale, to blind network buys in the 00’s achieving scale, but limited targeting, through to a direct site buy, with immense scale, and a myriad of different targeting options.
Facebook’s acquisition of Atlas gave them an offering broad enough to take Google on head to head.
Both Facebook and Google offer an ‘all in one’, ‘self service’ offering, should you wish to avail yourself of all of their services. With Facebook’s acquisition of Atlas in 2013, they really started to compete on a level playing field with Google, who of course had made their own big acquisitions of YouTube & Doubleclick in 2006 and 2007 respectively. With adserving, creative management, targeting, buying, all available to clients and agencies alike, they’ve made media planning more democratic.
In a game of ‘playing catchup’, Facebook has fared exceptionally well, albeit with an entirely different concept. The ‘opt in’ nature of their platform means that they can offer a breadth of targeting options which are based on verified user data, rather than the inferred demographic information relied upon by other advertising networks.
What does it mean for advertisers?
Essentially, advertisers have never enjoyed such choice and flexibility and breadth in their online campaigns. This means that advertisers can cherry pick almost every aspect of their campaigns, from demographic targeting, to interest targeting, to creative placement, to target KPIs, to payment metrics.
Facebook and Google have both evolved into the most accountable platforms, with the best reach and targeting in the UK. By running an integrated campaign across the Google platform, it’s possible to use paid search keywords to power contextual advertising across platforms such as Google Display Network, Gmail and YouTube, whilst combining remarketing and behavioural targeting.
Facebook is similar. By building a platform with verified user data, which works cross-platform, with over 30m regular UK users, spending significant amounts of time, and with an inherent social element to power sharing and online word of mouth, Facebook offers advertisers huge choice.
What are the risks?
Should we assume that this growth will continue exponentially? The two digital behemoths have such a robust offering, that it’s difficult to see how the duopoly won’t continue to dominate, however there are a few potential threats.
Industry regulation around anti-competition could come into play. Within the TV market, regulation exists to ensure that ITV doesn’t control too large a share of the industry, and recent rulings by the European Parliament to ‘break up’ Google, after an antitrust commission investigation should be worrying for shareholders.
In the UK, George Osborne’s recent creation of ‘the Google tax’, will demand that they pay an increase of corporation tax due to their profits being ‘artificially shifted’ abroad, in this case to Dublin. This may impact on UK operations – a relatively large market for Google, despite the relatively small population.
Google’s tax avoiding structure has come under scrutiny recently.
Facebook has also recently faced research which suggests that fewer and fewer teens are using the site, eschewing it in favour of Instagram and Twitter. This has lead to suggestions that Facebook could become ‘the new Myspace’. Conversely, this may actually be an opportunity for Facebook. Whilst the overall quantity of its users may decline (although at over 1 billion worldwide it’s not quite going to become a desert just yet) its fastest growing demographic is the over 50’s, and projections suggest that as much as 65% of their user base will be over 65 by 2017. This isn’t such a bad thing for Advertisers as the 55-64 age group have the highest disposable income of any age group, and over 50’s hold 80% of the nation’s wealth.
Another very real risk, is that advertisers will lose faith in the efficacy of the medium. As Google highlighted, up to 56% of ad impressions may not be visible on the average webpage. This may make advertisers questions whether their ad-spend would be better placed on a more high impact medium such as television. With other doubts being flagged by reports of high levels of click fraud and bot traffic, Facebook and Google must ensure that their ads are served to humans, in a highly visible format to assuage these industry doubts.
We live in a ‘golden age’ of online advertising. Never have advertisers had such choice, such accountability, such flexibility, such targeting options and such control over their campaigns. Whilst the likes of Google and Facebook make it very easy to ‘self-serve’ and use multiple products, this does limit the scope of opportunity for newer pioneering technologies to feature on media plans, and risks advertisers paying a premium for their products in an uncompetitive marketplace. There is still arguably a knowledge gap between the suite of products and services on offer from these giants, and the level of client management – whether through resource or knowledge. Agencies fulfil a vital role in planning and buying here, and by working with Google and Facebook to test new products and develop advances which serve their clients better, the industry can ensure that Google and Facebook’s influence can be harnessed for the better.