Long shadows, overly emotional TV ads and the uniform presence of Christmas trees in every shop window mean only one thing in marketing land: it is time for media agencies to look back at the current year’s ad spend and also project their estimates for the one that awaits us in January.
That’s exactly what GroupM, the largest media agency in the world, did this week at the UBS Global Media and Communications Conference in New York. But that is not what made the headlines. Among a kitchen’s worth of pie charts and a forest of impressive histograms, only one statistic stood out.
According to GroupM the ‘digital duopoly’ of Google and Facebook will end the year with an 84% share of all digital media investments for 2017. Let me say that again, more slowly and with the sound of distant, menacing bongo drums in the background. Google and Facebook enjoy an 84% share of global digital media.
To be fair, GroupM removes China from its calculations partly because of state influence and also because both members of the duopoly are restricted from operating there. But that single 84% data point, and the incredible implications for marketing, should trouble you deeply – with or without China included in the billings.
It’s certainly ominous news for media agencies like GroupM. Clearly, one of the major threats for any media agency is Google and Facebook not only having the lion’s share of the digital spend but also going direct to clients and taking out the media agency completely. It’s already common for big clients to get direct attention from vertical teams at Google and Facebook. It’s an obvious move down the track towards removing agencies completely and establishing direct connections with the 20% of clients who represent 80% of the ad spend.
The decline of traditional media
It’s even more concerning for traditional media who have no option than to play ball with the duopoly. The ‘first click free’ saga is a perfect example of what market power can deliver. You know the drill. You see an article you want to read online but after a one-second glimpse the newspaper informs you that your free articles for the month are up. Rather than sign up for a subscription you simply enter the title of the article into Google and you sail right past the paywall.
When you are solely dependent on digital media advertising and Google and Facebook are hoovering up most of the dollars, life is going to prove extremely difficult.
Despite the value of a paywall, most news media had to allow Google a free pass for all its users. If publications did not adhere to the policy their search results disappeared off a cliff. To be fair, Google recently revoked the policy and is now working more closely with publishers to respect their paywalls – but only after years of essentially allowing anyone a free pass around the charging mechanism that was essential for the future of the ‘fourth estate’.
And that decline in news journalism has come at a huge societal cost. Yes, newspaper editors were politically biased but they each held their responsibilities to inform their audiences very seriously. The era of Trump and the death of truth can be directly linked to the rise of the digital duopoly (45% of Americans now get their news from Facebook for example) and the subsequent decline in proper news media caused by the duopoly’s ascent.
I got in a row with my wife last week about how much sugar I was putting in my coffee (about eight kilos). So, I Googled “Is sugar good for me?” and got the result above. My wife grabbed her phone and asked Google “Is sugar bad for me?” and got the result below. The end result in the Ritson household was me drinking a cup of very sweet ‘strategic’ coffee alone in the downstairs guest bedroom with the dogs.
But take our little domestic over sugar and multiply it by a billion people and across issues like gay rights, militant Islam and political misdeeds and you have a perfect recipe for societal unrest. Never mind the ability of the Russians and God knows who else to get inside the system and bend it to their advantage.
And the rise of the digital duopoly has not just come at the cost of traditional news media and societal stability. You may have noticed in recent weeks that a considerable number of once-vibrant digital media titles are in retreat. Huffpost missed its targets. Mashable sold for $50m which was about $200m less than it was once supposed to be worth. Buzzfeed is slashing jobs. None of them made a profit this year.
This is all because, unlike your traditional news media, they are denied the luxury of paid subscriptions and print advertising income. When you are solely dependent on digital media advertising and Google and Facebook are hoovering up most of the dollars, life is going to prove extremely difficult.
The so-called ‘digital media crash’, which many predict will come in 2018 when titles like Vice and Buzzfeed will be reappraised as not the billion-dollar brands they purport to be, will happen partly because, if your source of business is digital media advertising and your name is not Google or Facebook, it is very hard to actually break even. The Daily Mail still makes four times more revenue from its newspaper business than from its global online site – despite the former being restricted to a very particular UK demographic and the latter being the most popular English language news website in the world.
And don’t even get me started on copyright and royalties. Both members of the duopoly steadfastly deny they are publishers and claim, instead, to be platforms. That status protects them for any responsibilities for policing the content they make money advertising around. Instead this content is uploaded by users and they are deemed responsible for the content, including music and video, that appears on Facebook and Youtube.
Despite YouTube representing the most popular way for people to stream music, it pays a fraction of the royalty money of other streaming sites like Spotify. The IFPI, the global recording industry group, estimates YouTube pays around $1 per user for an entire year of listening despite making billions from advertising on these sites. Last year British recording artists earned more money from vinyl sales than they did from YouTube.
Digital duopoly staff are blind to dangers
Let’s make it clear that this is not a criticism of the employees of the digital duopoly, just what they are unwittingly doing to the world. I know people at both Facebook and Google – quite senior people in several cases. One of my favourite MBA students of all time, whom I taught at MIT and who became my teaching assistant, went to work at Mountain View and has been there ever since.
I can confirm that everyone I know at both Google and Facebook is a sincere and extremely affable person. And that is part of the problem. Because while I cannot say a bad thing about anyone who works at these companies it is clear that market dominance – combined with continued growth and the kind of societal influence only enjoyed by Jesus, Mussolini and Ant and Dec – makes both companies a scourge on the future.
I spoke once at a Google internal event and expounded on my theory that the company was soon to become the 21st-century equivalent of ‘big tobacco’ and the combined look on the faces of 200 thoroughly delightful employees suggested that I was clearly off my rocker. Within the digital duopoly they really do think they are a force for good. Google employees, at quite senior levels, still think their mission is to share the world’s information.
I can confirm that everyone I know at both Google and Facebook is a sincere and extremely affable person. And that is part of the problem.
Facebook people don’t snigger when their chief operating officer Sheryl Sandberg claims that the company is all about building community. The duopoly is populated by some of the most talented, driven and delightful people on the planet and none of them – at least until they retire – are currently able to appreciate how much damage they are doing.
And things will only get worse in the years to come. The amount of marketing money being spent on digital media will only increase, while the duopoly’s likely share of that growing pile of cash will also get bigger. Growing beyond a combined 84% share between two companies might seem impossible, but it’s definitely not. There was proof of that in the GroupM presentation: not only does the duopoly have 84% share of current digital media, it also accounted for 186% of digital growth this year, according to GroupM data.
I will pause here and give you a second to work that one out because its not an immediately obvious calculation. How can Facebook and Google have more than 100% of the growth in digital media spend outside China? The answer is if they are growing and the rest of the digital media industry is shrinking.
Take Google and Facebook out of the equation and look at everyone else and digital media is a declining industry this year. That’s important because before you start thinking ‘Ritson is just hammering digital media again because he’s a dinosaur’, you should pause and consider that the implications for everyone, bar Google and Facebook, suck at this point. Everyone.
Competition is non-existent
In an earlier era we might have expected the government to step in and break up these two behemoths. That’s what happened to AT&T in 1982 when the US government deemed that it had too much control of the American telephone network. But that won’t happen this time because, as you may have noticed, the American political system is completely fucked. Google and Facebook spent a combined $7m on lobbying last quarter in America and you can be sure that money was well spent to ensure that the long-term break-up of either company is impossible – even if the Democrats eventually unseat The Donald.
The European Union will continue to take big bites out of both companies, but the reality is that only an American government can step in and do something meaningful to the structure and dominance of the duopoly and this will simply not happen. The fact that both Google and, especially, Facebook has intriguing potential to influence elections only makes a government mandated break-up all the more unlikely.
And don’t fall for all that baloney about Amazon being a genuine threat to the duopoly. One of the things duopolies do is big up potential threats so they do not look so much like a duopoly. Remember a few years ago how Snapchat was the new third force in digital media? Yeah, well, the average ad price on that platform is down 60% this year and they missed their revenue targets because…well, you know…the duopoly is crushing it.
Amazon represents a different but equally unlikely threat to the duopoly. Both Google and Facebook make more than 95% of their money from advertising; Amazon is not interested in any of this. It is a retailer. About 1% of its revenues come from advertising. Sure, there is a long-term threat that Amazon’s superiority with voice will kill search and with it Google’s main revenue stream. But this is a long way off, if at all likely.
Forget about an end to the digital duopoly. Instead, even if you are a relatively young marketer, accept the likely prospect of your whole career in marketing taking place beneath the shadows of these two behemoths. If you’re smart you will do everything you can to get a job there and enjoy the inherent advantages of working for a company that controls a massive slice of the market. There is no finer or safer place to be a marketer in the decade ahead.
Outside the gilded offices of the duopoly? Not so nice.