Facebook and Google own our eyeballs

In late May, comScore released its most recent app popularity report, revealing — somewhat unsurprisingly, since these rankings don’t change substantively from year to year — that Facebook and Google own 60% of the most used apps on mobile:

Nielsen released a study at the end of 2016 that told pretty much the same story: Facebook and Google dominate engagement on mobile with their constellations of apps:

These types of proclamations (who owns the top apps) have almost become banal: it’s obvious and has been for a while that Facebook and Google (and a handful of other companies with legacies in the desktop web) control mobile engagement.

Facebook did so almost as a result of gravitational force: it had a big user base on desktop and the secular shift to mobile dragged it onto that form factor, although its early efforts on mobile were halfhearted and perfunctory, with the 2012-vintage Facebook app on iOS prone to frequent crashing. But through an internal awaking to the power of mobile ads, followed by a string of prescient M&A transactions (WhatsApp, Instagram), Facebook has become one of two behemoths on mobile with representation on every “Top Apps of the Year” list.

Google’s ascent on mobile was less unstable: it mostly seemed pre-ordained at the time. After all, Google’s most valuable consumer-facing properties on the desktop web in 2012 are more or less its most valuable consumer-facing properties on mobile now (search, YouTube, Maps, GMail), except that its money making machine, AdWords and associated ad optimization infrastructure, has had its engine turbocharged with the data of two billion monthly active Android devices.

And so these two companies have appropriated our time on mobile. But perhaps more interesting than capturing a very healthy majority of engagement is the fact that they’ve elbowed out almost every other participant in the digital marketing ecosystem (of which mobile is now a majority — mobile advertising surpassed desktop web advertising in 2016, according to the IAB and PwC) to the point where the two companies owned 89% of revenue growth in 2016, again according to the IAB:

(One interesting thing to note: the IAB’s original report claimed that Facebook and Google had taken 99% of all digital advertising revenue growth. I presented that statistic at a conference, where it was rightly challenged by a member of the audience for not passing the smell test. In looking into the report after the conference, I found that IAB had quietly revised the report but not really issued a retraction.)

How did this come to be, and is it sustainable? Ad load is always a fraught topic in Facebook earnings calls, but via expanding its product portfolio and consistently introducing new functionality into its apps, it seems that Facebook has found a way around that. Google likewise has found innovative new ways to introduce ads into its mobile apps and is generally very crafty in a “use the whole buffalo” sort of way when it comes to new formats. Google is also taking another shot at expanding its footprint in the developing world with a new version of Android for lower-end phones.

That ownership of engagement leads to dominance in advertising isn’t very remarkable — Facebook and Google aren’t going to let 3rd parties sell their native inventory, and with Audience Network Facebook has actually managed to do just the opposite. But what will be interesting to track over the next 12-18 months is how this dynamic changes as Facebook and Google turn their individual apps into content and app distribution portals. Facebook’s efforts here have been fairly obvious and well documented, but Google’s have been furtive: ordering an Uber directly from Google Maps, for example. Google’s AMP project (which isn’t utilized within an app but is nonetheless helping to drive mobile advertising revenue growth for the company) and Facebook’s Instant Articles product are also shifting ad revenues away from other players.

With smartphone sales growth more or less flat, though, the tailwinds that produced surging revenues in mobile advertising ex nihilo are tapering off. The content distribution strategy is a way around that, if short term: build a tent around as much content as possible and put a giant billboard in the middle of it.