Saturday August 01, 2020 |Notes

Digital advertising landscape is diversifying

The entire landscape of the online paid advertising is in the brink of major disruption. It's been dominated by Google and Facebook and there's concern the companies market share will continue to grow, as addressed in the recent Congressional hearing with four leading tech CEOs. It appears more likely that their market share has peaked. Paid ad spend will become more evenly distributed among a handful of major tech companies due to both existing trends and pivotal changes.

Facebook and Google have commanded over 60% of digital ad spend in recent years. Amazon has quickly grown to nearly 9% of the market as of 2019. Given the financials reported than Amazon through Q2, it's likely that growth has accelerated. The Amazon Marketplace is increasingly dependent upon companies advertise products in order to get listings seen by customers, driving more revenue to Amazon Ads. And given Amazon's reputation for expanding services, it's nearly

There's a likely scenario playing out where TikTok will soon be divulged to Microsoft. Reportedly, TikTok has built an automated ad network similar to the solution provided by Facebook. Given the popularity of TikTok, this would give Microsoft, or any other parent company, a massive asset to compete against Facebook and Google.

And given some of the documents released related to the Facebook/Instagram merger, it's not out of question that Facebook will be forced to divulge Instagram. Scott Galloway wrotet about up Zuckerberg's discussion on the topic:

Rep. Jerry Nadler challenged Zuck based on emails from before the Instagram acquisition. In the emails Zuck acknowledges he wants to buy the company in order to neutralize Facebook’s competition. Nadler got much more than he could have hoped for. Zuck went on to acknowledge, even brag, that once Facebook bought Instagram, they crushed all of Instagram’s competition. Zuck’s answer made clear that Facebook’s market power is so great, they can terminate an entire market category simply by appending it to their business. When the committee’s report comes out, expect to see a recommendation that Facebook be required to spin Instagram, citing this answer and an assessment of how Facebook used its resources, network effects, and other powers to grow Instagram and push its competitors out of the market. Nadler knew a gift when he got one: “Mr. Zuckerberg, you’re making my point.”

At this point, it doesn't seem likely that Facebook and Instagram will split. From an antitrust standpoint, there are a lot of questions about how Facebook and Instagram could be too big, while bytedance could be forced to sell to tech giant Microsoft. Regardless, the landscape is changing and will not be dominated by only two companies in the future.

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