Google and Facebook accounted for 24.5 per cent of all ad spend of any type globally in 2018, raking in $144.6bn (£109.8bn) of the $590.4bn total between them. This is up from 20.3 per cent in 2017 and more than double the 10.8 per cent recorded in 2014. The figures come from the international marketing intelligence service, WARC, which predicts a further increase to 28.6 per cent ($176.4bn) this year.
Looking at digital advertising only, the duopoly accounted for 56.4 per cent of ad spend in 2018, a share which WARC expects to rise to 61.4 per cent this year. This growth is squeezing other online media owners, as the pool of ad money available to them is now in decline for the first time, down 0.7 per cent to $111bn.
"One of the main reasons for the duopoly's success is their creation, and subsequent ownership, of the digital formats perceived to be most effective by adland's decision makers: paid search and social,” said James McDonald, WARC’s data editor, and author of the research. “Several surveys in the past year have shown search and social to be highly regarded by advertisers in terms of meeting campaign objectives.
"Google dominates the search engine market, handling almost all mobile searches worldwide and nine in 10 on desktops. Meanwhile, ad buyers can target Facebook's 1.48bn daily users by leveraging a rich cache of personal data. Beyond major brands, the accessibility of the duopoly's ad buying tools has attracted a long tail of small- and micro-advertisers, creating a competitive advantage which has been core to revenue growth."
Three key trends
Against this backdrop, WARC's research on the duopoly highlights three key trends. The first is that Google and Facebook are competing head-to-head for dominance in video. The value of the online video market across WARC's 12 key markets – Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Russia, UK, US – is $30.2bn, which equates to 21.5 per cent of linear TV, and is growing rapidly. Much of this money is spent on social media sites, including Facebook and YouTube (e.g. 86 per cent, or £1.9bn in the UK).
Both Google and Facebook hope to unlock brand budgets, while also controlling the trade of targeted performance advertising. Regulation appears to be the principle threat to the duopoly's growth, which currently shows no sign of a significant slowdown.
The second trend is Google’s battle with Amazon on two fronts to defend its search market dominance. Google handles 63,000 search queries per second – or 2 trillion in an average year – but its dominance of the paid search market may soon come under threat from Amazon, which is developing its own search business, looking to pair advertisers with consumers close to the point of purchase.
While WARC expects Amazon to make $13.9bn from advertising this year (compared to Google's $107.4bn), its ad business is growing much faster than Google's, with 69 per cent of marketers in a recent WARC survey stating that they intend to up their ad investment on Amazon this year.
Amazon, which has a rich database of consumer purchasing habits, has also stolen a march on Google in the emerging area of voice search. Its Echo devices are used by 63 per cent of American smart speaker owners, well ahead of Google's Home devices on 26 per cent.
The third trend is an exodus of Younger Americans from Facebook's core platform towards Instagram, which Facebook owns. Instagram is now the main driver of daily user growth for Facebook, with estimates suggesting that as many as 15m US users have left Facebook's core platform since 2017.
Instagram's rise in popularity hasn't gone unnoticed by marketers, with Instagram recording a net budget increase (the number of practitioners intending to increase budgets minus the number intending to decrease) of 67 per cent in a recent WARC survey, ahead of Amazon on 63 per cent, YouTube on 60 per cent, and Facebook on just 13 per cent.
Facebook is responding by pivoting to an encrypted messaging service to regain consumer trust, and to build a secure environment for online payments. The company spent $1.1bn on advertising worldwide last year in the wake of the Cambridge Analytica scandal, though some feel its ads merely draw attention to the issues it is trying to deflect attention away from.
You can download a sample of the report here.