January 27, 2023

Eureka News

All the News All the Time

Meta and Alphabet are losing dominance in the US digital ad market

Meta and Alphabet have lost their dominance in the digital advertising market, which they have dominated for years, as the duopoly is hit by fast-growing competition from rivals Amazon, TikTok, Microsoft and Apple.

The share of U.S. ad revenue from Facebook’s parent company Meta and Google-owner Alphabet is expected to fall 2.5 percentage points to 48.4 percent this year, the first time since 2014 that the two groups won’t hold a controlling stake in the market, sources said it research group Insider Intelligence.

This marks the fifth consecutive annual decline for the duopoly, whose market share has fallen from a peak of 54.7 percent in 2017 and is expected to decline to 43.9 percent by 2024. Globally, Meta and Alphabet’s share fell 1 percentage point to 49.5 percent this year.

Jerry Dischler, Google’s head of advertising, told the Financial Times that the fierce rivalry among new entrants reflects an “extremely dynamic ad market”.

Regulators in the US and Europe have added antitrust investigations such as: B. the prosecution of Google for allegedly advertising its products to competitors. In December, Facebook owner Meta was served with a complaint from EU regulators over concerns that the social network’s classifieds service was unfair to competitors.

Tech giants are fighting harder than ever for a share of the $300 billion digital ad market, even as companies around the world are cutting advertising budgets in response to rising interest rates and high inflation.

Amazon and Apple have expanded their advertising teams. In July, Netflix announced it was working with Microsoft to build an ad-supported tier of its streaming service.

Meta CEO Mark Zuckerberg has blamed the recent sales declines on Apple’s privacy changes, which make it harder to track users and target ads, and the rising popularity of viral video app TikTok, owned by Chinese parent company ByteDance.

“Four years ago you wouldn’t have talked about either [TikTok or Amazon] in advertising,” Dischler said. “So it’s really telling that more and more people are recognizing that advertising is a great and scalable business model.”

You see a snapshot of an interactive graphic. This is most likely because you are offline or JavaScript is disabled in your browser.

Amazon’s foray into the world of digital ads has played a big part in achieving meta and Google dominance. After playing in the market for years, it stepped up its efforts in 2015 and has since seen ad revenue skyrocket from less than $1 billion to an estimated $38 billion that year.

“Before I joined, I didn’t even know what Amazon Ads was,” said one Amazon executive, who says they now “manage a huge team — and I didn’t know there was such a thing until the recruiter called.” “.

Paul Prior, chief operating officer of Undertone, a digital advertising company, said retail giants led by Amazon have woken up to the realization that their vast customer data is the basis for a massive advertising business with higher margins than selling goods online could be.

But Amazon then went one step further and expanded its onsite ad business beyond its own shopping site. “Across the digital universe, they’re leveraging this dataset to empower brands and advertisers to buy better, spend more effectively, and increase return on ad spend,” Prior said.

Apple has also emerged as a new threat. Ad revenue has grown from under $2.2 billion in 2018 to more than $7 billion this year. Though that accounts for just 1.2 percent of the global market, it’s already more than Snapchat and Pinterest combined, and some estimates suggest Apple could hit $30 billion in ad revenue by 2026.

In September, the FT announced that the iPhone maker plans to nearly double the workforce at its fast-growing digital advertising business. His job ads describe ambitions to “redefine advertising” for a “privacy-centric” world.

Zuckerberg has repeatedly criticized Apple’s “conflict of interest” and has slammed Apple for charging “monopoly rents” and stifling innovation. Apple’s privacy rules have made it harder for Meta to tailor ads to people, which has helped its stock fall about two-thirds over the past 15 months.

Google doesn’t seem to have seen as much impact from Apple’s privacy changes, as it can tailor ads directly to users who type in search terms — and get valuable “user intent” data that Meta has a hard time getting to.

But Apple already has its own Google Maps rival, a search feature on the iPhone, and it’s building a burgeoning ads business – which analysts say could rival Google in the future.

“Apple has a really strong brand that consumers trust, and they have the devices that the crème de la crème of consumers are using,” said Josh Koenig, chief strategy officer at Pantheon, a digital marketing platform. “If they figure out how to turn this into a really valuable network for advertisers, they can charge a premium.”

Insider Intelligence has forecast that Google and Meta’s U.S. ad growth in 2023 will be just 3 percent and 5 percent, respectively, while at least eight of its peers will post double-digit gains.

Amazon’s ad business is estimated to grow 19 percent, Apple 26 percent, Spotify 30 percent, TikTok 36 percent, and Walmart 42 percent. However, the market shares of many of these groups are currently small.

Dischler said Google is working hard to expand its ads business in both e-commerce — where it works with retailers — and in privacy-focused advertising, where he argues Google could play a bigger role than Apple.

“I don’t see this as a zero-sum game at all,” Dischler said. “When Uber has an advertising network — billboards on cars that didn’t have billboards before, and offers advertising opportunities when you get groceries or groceries through restaurants — then they make the pie bigger.”