Meta and Alphabet have lost their dominance over the digital advertising market they have ruled for years, as the duopoly is hit by fast-growing competition from rivals Amazon, TikTok, Microsoft and Apple. The share of US ad revenues held by Facebook’s parent Meta and Google owner Alphabet is projected to fall by 2.5 percentage points to 48.4 percent this year, the first time the two groups will not hold a majority share of the market since 2014, according to research group Insider Intelligence. This will mark the fifth consecutive annual decline for the duopoly, whose share of the market has fallen from a peak of 54.7 percent in 2017 and is forecast to decline to 43.9 percent by 2024. Worldwide, Meta and Alphabet’s share declined 1 percentage point to 49.5 percent this year.
Jerry Dischler, head of ads at Google, told the Financial Times that fierce rivalry from new entrants reflects an “extremely dynamic ad market.” Regulators in the US and Europe have added antitrust scrutiny such as pursuing Google for allegedly promoting its products over rivals. In December, Facebook owner Meta was served with a complaint from the EU’s watchdogs over concerns that the social network’s classified advert service is unfair to rivals. Tech groups are fighting harder than ever for a share of the $300 billion digital ads market, even as companies worldwide are cutting their ad budgets in response to rising interest rates and high inflation. Amazon and Apple have expanded their advertising teams. In July, Netflix announced it would partner with Microsoft to build an advertisement-supported tier of its streaming service.
Meta chief executive Mark Zuckerberg has blamed recent revenue falls on Apple’s privacy changes that make it harder to track users and target advertising, as well as the growing popularity of viral videos app TikTok, owned by Chinese parent ByteDance. “Four years ago, you wouldn’t be talking about either [TikTok or Amazon] in advertising,” said Dischler. “So it’s really telling that more and more people are acknowledging that advertising is a great and scalable business model.” Amazon’s foray into the digital ads world has played a big part in hitting Meta and Google’s dominance. After years of toying in the market, it ramped efforts up in 2015 and has since seen ad revenues skyrocket from less than $1 billion to an estimated $38 billion this year. “Before I joined, I didn’t even know what Amazon Ads was,” said an Amazon executive who says they now run “a massive team—and I didn’t know this existed before the recruiter called.” Paul Prior, chief operating officer of Undertone, a digital advertising company, said retail giants led by Amazon woke up to the realization that their extensive data on customers could be the basis for a massive advertising business with higher margins than the sale of goods online. But Amazon then went a step further, expanding its on-site ads business beyond its own shopping site. “Across the wider digital universe, they use that data set to empower brands and the advertisers to buy better, to spend more effectively and drive return on ad-spend,” said Prior.
Apple has also emerged as a new threat. Its ad revenues have grown from under $2.2 billion in 2018 to more than $7 billion this year. Although that is just 1.2 percent of the global market, it is already more than Snapchat and Pinterest combined, and some estimates suggest Apple could reach $30 billion of ad revenue by 2026. Zuckerberg has repeatedly hit out at Apple’s “conflict of interest,” criticizing it for charging “monopoly rents” and stifling innovation. Insider Intelligence has forecast that Google and Meta’s US ad growth in 2023 will be just 3 percent and 5 percent, respectively, while at least eight of its rivals are to experience double-digit gains.
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