Mary Meeker released her latest Internet Trends report last week; as usual, it’s required reading. Meeker directed attention to the state of internet advertising early in the report with these two graphs:
For anyone operating in mobile, the dynamics underlying these charts shouldn’t be a surprise. The mobile advertising market has been growing explosively for the past few years, driven by factors that I outlined in a recent presentation, The State of the App Economy: 2019 and Beyond.
And, of course, that growth in mobile advertising revenues, which was made possible by the almost total penetration of smartphones, shifting behaviors towards video content consumption, increased access to cheap mobile data plans, and accommodations by the mobile platform operators (Apple and Google), means the companies generating those revenues are encouraged to invest money into infrastructure that makes that advertising ever more targeted and performant, benefiting advertisers and publishers alike in what I’ve called the second mobile cycle.
In a recent article, How large is the mobile gaming advertising market?, I made the case for why the mobile gaming advertising market could be worth $100BN per year. But there are numerous other verticals that exist solely because they can build massive audiences through effective mobile advertising; the boom in mobile advertising is really an artifact of the general mobile boom that supports that advertising.
And while advertisers are thrilled to have the opportunity to distribute their products with the kind of precision that modern mobile marketing tools afford, which advertising platforms are the beneficiaries of the growth showcased in the chart above? A third chart from Meeker’s presentation says one thing with the title but depicts another:
It’s true that the entirety of the “other” group of advertising platforms here is growing faster than Facebook and Google, but there’s nuance that is absent from the slide. Firstly, Amazon makes up the vast majority of that revenue:
And Amazon also makes up much of that growth: its “Other” sales category grew from $2.03BN in Q1 2018 to $2.710BN in 2019. That is a substantial amount of money — I believe Amazon is on track to become the third party in a Triumvirate, upsetting the Duopoly — but it’s still peanuts compared to Alphabet’s $30.7BN in Q1 advertising revenues (up 15% year-over-year) and Facebook’s $14.9BN in Q1 advertising revenues (up 26% year-over-year). Pull Amazon out of the “Other” category in the chart above and it’s clear that Amazon is an incipient threat to Facebook and Google but the vast majority of the spoils of the growth of internet advertising are being captured by Google and Facebook.
eMarketer pegs Facebook and Google’s collective share of the 2018 internet advertising market at roughly 57%, but that’s inclusive of desktop, with players like Bing, Yahoo!, and Oath still generating billions per year in advertising revenue. But mobile is the real growth sector, and back in 2016, the IAB — an advertising trade group — released a report in which they claimed that Facebook and Google collectively owned 89% of all growth in advertising revenue, meaning they own mobile. Has that really changed?
It doesn’t seem likely, looking at the numbers from above, and it’s unclear how it could change outside of government intervention or regulation. Facebook and Google have data and infrastructure that simply can’t be replicated by other players: when we say that internet advertising revenues are growing, we really mean that mobile advertising revenues are growing, and by that we really mean that Facebook and Google and Amazon advertising revenues are growing.