In Economics, we learn that in an Oligopoly, the consumer suffers because of potential collusion leading to higher prices and lack of consumer choice.
Google and Facebook Rigged the Ad Market
With a combined share of ~53%, the digital ad space is currently being dominated by Google and Facebook. In such a duopoly (a special form of Oligopoly), collusion is always a possibility, and it turned out to be true when Google colluded with Facebook to favour its own exchange.
Oligopoly Trend is Not Waning
This problem of Oligopoly is definitely not going away anytime soon. It is exacerbated by further consolidation in the ad supply space (Applovin acquiring Mopub & ironSource acquiring Tapjoy) and Facebook/Google withdrawing further behind their walled gardens.
What can be Done?
Brands / Advertisers definitely have their work cut out for them. To stand out and succeed in time to come, I believe advertisers would need to focus on the following:
- Grow their product’s core value: Costs of digital advertising will be on the rise, and thus it will be important to provide real value to customers/users.
- Increase their users’ lifetime value: With the rising costs, revenues need to go up by either extending your customers’ lifetime or improving the ways you are monetising.
- Diversify to market disrupters like TikTok: We need to start diversifying to other digital marketing channels so that we do not continue to feed to their duopoly. It is probably easier said than done, but this is why we need more disruptors like TikTok.
The digital ad space will certainly start to feel tighter but do not mistake that for it being smaller.
We just need to grow bigger and better with it!