The Duopoly is over (because Everything is an Ad Network)

Axios reports that Google and Meta — known in combination as the digital advertising “Duopoly” — are expected to capture less than half of US digital advertising revenue in 2022 for the first time since 2014. According to Axios, Insider Intelligence estimates that Google and Meta will account for 48.4% of all U.S. digital ad revenue this year, which is down from a peak of 54.7% in 2017. These appraisals indicate that Meta’s share remains flat at roughly 20% over that timeline whereas Google’s share decreases from 35% in 2017 to 28% in 2021, albeit against the backdrop of significant market growth.

The Duopoly was once seen as unassailable: in Facebook and Google own our eyeballs, published in 2016, I write:

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.

But recently, a diversified digital advertising marketplace has flourished, and Amazon’s growth into a scaled challenger to Google in particular has been evident for the past few years. Back in 2018, I proposed that Amazon might disrupt the Duopoly; in 2019, I deemed the advertising market to be dominated by the triumvirate of Google, Meta (then, Facebook), and Amazon. This eventuality was clearly apparent then, and it’s manifest now across a fresh crop of new market entrants.

The contenders for digital advertising dollars are numerous: Amazon is the most obvious, reporting $31BN in advertising revenue in 2021, but others, such as Apple with the growth of its ad network and the various retail media networks that have proliferated in the wake of Apple’s App Tracking Transparency (ATT) privacy policy, are ascendant.

I attempt to encapsulate the market dynamic driving the growth of retail media networks with the slogan Everything is an Ad Network. The logic underlying Everything is an Ad Network is that ATT disrupted the status quo that previously led most advertisers to social media platforms, and a number of ad networks have emerged out of retail businesses to monetize their own first-party data as social media advertising efficiency has degraded. From Why is Everything an Ad Network?:

Social platforms can no longer ingest the totality of digital artifacts emitted by users as they traverse across apps and websites. In this new privacy landscape, the best place for some advertisers to deploy budget may be contextually-relevant retail or eCommerce properties that possess first-party, user-level purchase history data within the product categories most relevant to their own.

The Duopoly era seems to have ended now that Google and Meta capture less than 50% of the US digital advertising market. Given the astonishing growth of Amazon, TikTok, and various retail media networks — including those which launched this year, such as Netflix’s — it is reasonable to characterize the digital advertising market in 2022 as being materially more competitive than it was in 2016 or 2017. The Duopoly depiction is tenuous with Google and Meta seeing a combined minority share.

Nonetheless, even if the Duopoly has been eroded by new and ascendant market participants, Google’s and Meta’s positions as the #1 and #2 ad channels by revenue are likely secure for the foreseeable future.

In order to attain Google’s 2021 revenue levels by the year 2026, Amazon would need to grow from its 2021 revenue baseline by an astonishing 46% CAGR; Apple and TikTok would each need to grow by 121% CAGR. And while eMarketer does forecast impressive year-over-year growth from 2022 to 2023 for each of these channels — 36% for TikTok, 26% for Apple, and 19% for Amazon — those platforms will lag Google and Meta for the foreseeable future, barring some dramatic market upheaval (for instance: at a constant 36% yearly growth rate, it would take TikTok 13 years to grow its estimated $4BN in revenues last year to parity with Google’s 2021 ad revenue).

Header image modified from a photo by Florian Schmetz on Unsplash