Calls to break up the big tech companies may be overdone depending on which side of the regulatory and political aisle you are on. But a loosening of the grip by Google and Facebook on the global advertising market will prove to be a good thing for a burgeoning ad tech industry.
Any time a monopoly or, in this case, duopoly is unchallenged for too long it harms innovation. That’s certainly become true of ad tech of late. Google announced earnings at the end of April and, as expected, we saw its advertising businesses increasingly pressured by newcomers like Amazon – sending the Alphabet stock down 15 per cent, its worst day decline in nearly seven years.
To be clear, I’m a fan of Google and Facebook. They’ve done amazing things for global advertising, connecting billions of consumers seamlessly to brands and marketers. But that has sometimes come at the expense of opportunities for smaller ad tech providers and would-be innovators.
The first signs of trouble for the duopoly became apparent during the previous earnings season in February, when Amazon reported that it earned more than $10 billion in 2018 income – most of which came from its advertising business. That raised eyebrows.
Indeed, Amazon’s e-commerce platform, which has a natural ability to gather consumer data, gives it an edge over Facebook. Google is more diversified with its search business and its Android mobile operating system, which powers most of the world’s smartphones. But traffic acquisition costs for Google have been very obviously rising as a percentage of revenue.
Competition is forcing both Facebook and Google’s costs up in the advertising space. With Amazon as the new competitor, we will move into a healthier state of affairs with a little bit more room for smaller ad tech players to steal slices of the giants’ pie.
I’m a strong believe that ad tech start-ups and innovators have an important role to play in the future of advertising, with a few big challenges on the immediate horizon that they can help solve.
One big challenge is around how to reduce ad loads on consumers, by which I mean how advertising evolves to continue delivering margins and profits while reducing the disruption caused to consumers. This tends to happen when ads are not delivered seamlessly in a way that flows with the content experience they are consuming, be it on a browser, TV, tablet, or mobile.
For example, rather than interrupting a consumer watching a TV show with a regular advert, a mixed reality experience prompt could be offered that invites them to learn more about a product they just saw on their favourite TV show. It could be Tesla’s latest electric car or Samsung’s new folding smartphone.
The technology already exists for the mixed-reality prompt to be delivered to the consumer’s tablet or smartphone, though the content was being watched on their TV.
Another use case could include allowing a fashion store to send a shopper, who made it to the changing room but not the cashier, a promo through social media inviting them to go back to the store to complete their purchase – with a suitable incentive. This kind of offline-to-online tracking technology already exists, but challenges remain around how to implement it in a way that is not creepy.
Ads need to become more relevant and targeted, but there is also a deeper question about the need for advertising to be reinvented altogether. If there is to be a rebirth of the industry – revolution rather than evolution – ad tech players are going to play a key role in how that’s conceptualised, achieved, and delivered.
With a more competitive advertising industry, the guys at the top (Amazon, Google, and Facebook) will be forced to innovate more quickly and aggressively in terms of what they offer the buy and sell sides. This will mean many more ad tech acquisitions and greater market incentives for breakthrough technology to be built, bought, and sold.
I’m optimistic about the end of the Google-Facebook duolopoly in advertising and so should you be – especially if you’re one of the little guys. It will prove to be a big boon for ad tech.