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$176B from ads, 60%+ market share: Duopoly’s “uneven balance of power”

For the first time, the strength of the duopoly is reducing the pool of ad money available to other online media owners.

WARC, the international marketing intelligence service, has found that of the $590.4bn spent on advertising worldwide last year, $144.6bn (24.5%) went to the Google and Facebook ‘Duopoly’, which equates to almost one in four dollars.

The duopoly’s adspend share is up from 20.3% in 2017 and is more than double the 10.8% recorded in 2014. WARC predicts a further increase to 28.6% ($176.4bn) this year.

Looking only at the internet advertising market, the duopoly took over half (56.4%) of ad money in 2018, a share which WARC expects to rise to 61.4% this year.

This growth is squeezing other online media owners, as the pool of ad money available to them is now in decline for the first time, down 0.7% to $111.0bn.

James McDonald, Data Editor, WARC, and author of the research, comments:

Google and Facebook are now the gatekeepers of online news consumption, becoming the primary source of news for American consumers aged 18–29.

This is having a profound effect on publishers worldwide – who now need to abide by the Duopoly’s algorithms in order to be seen – and comes at a time when core business is under pressure from the halving of print circulation over the decade and a steep decline in ad income, where digital gains have not been enough to offset print losses.

“The Cairncross Review, ordered by the Prime Minister, recently noted an ‘uneven balance of power’ between publishers and online distributors of news content, and called for – perhaps belatedly – regulatory framework be applied to level the playing field. Whether this will be enough to turn the tide remains to be seen,” James said to What’s New in Publishing.

Against this backdrop, WARC’s research on the duopoly highlights 3 key trends:

Google and Facebook are directly competing for video dominance

The value of the online video market across WARC’s 12 key markets – Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Russia, UK, US – is $30.2bn, which equates to 21.5% of linear TV, and is growing rapidly. Much of this money is spent on social media sites, including Facebook and YouTube (e.g. 86%, or £1.9bn in the UK).

Both Google and Facebook hope to unlock brand budgets while also controlling the trade of targeted performance advertising. Regulation appears to be the principle threat to the duopoly’s growth, which currently shows no sign of a significant slowdown.

Google is battling Amazon on two fronts to defend its search market dominance

Google handles 63,000 search queries per second – or two trillion in an average year – but its dominance of the paid search market may soon come under threat from Amazon. The e-commerce giant is developing its own search business, looking to pair advertisers with consumers close to the point of purchase.

Whilst WARC expects Amazon to make $13.9bn from advertising this year (compared to Google’s $107.4bn), its ad business is growing much faster than Google’s, with 69% of marketers in a recent WARC survey stating that they intend to up their ad investment on Amazon this year.

Amazon, which has a rich database of consumer purchasing habits, has also stolen a march on Google in the emerging area of voice search. Its Echo devices are used by 63% of American smart speaker owners, well ahead of Google’s Home devices on 26%.

Younger Americans are leaving Facebook’s core platform for Instagram

Instagram is now the main driver of daily user growth for Facebook, with estimates suggesting that as many as 15m US users have left Facebook’s core platform since 2017.

Instagram’s rise in popularity hasn’t gone unnoticed by marketers, with Instagram recording a net budget increase (the number of practitioners intending to increase budgets minus the number intending to decrease) of 67% in a recent WARC survey, ahead of Amazon on 63%, YouTube on 60%, and Facebook on just 13%.

Facebook is responding by pivoting to an encrypted messaging service to regain consumer trust, and to build a secure environment for online payments. The company spent $1.1bn on advertising worldwide last year in the wake of the Cambridge Analytica scandal.

Global media analysis – The Duopoly (Key findings)

  • 28.6% Google and Facebook’s expected share of global adspend this year, up from 24.5% in 2018
  • 41.0% search and social media’s share of US adspend
  • 51.8% share of attainable users Facebook reaches every day
  • 61.4% the Duopoly’s expected share of the online ad market this year
  • 82.7% Facebook’s share of US social adspend in 2018
  • 86.0% social’s share of UK online video advertising spend

You can download the report sample here.

Global Ad Trends, a monthly report which draws on WARC’s dataset of advertising and media intelligence to take a holistic view on current industry developments, is part of WARC Data, a dedicated online service featuring current advertising benchmarks, data points and trends in media investment and usage.

Images courtesy WARC Data Report: Global Ad Trends, The Duopoly