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The US$300bn Google-Meta advertising duopoly is under attack

The pair face a weak economy and powerful new rivals

Published Mon, Sep 19, 2022 · 04:07 PM

FOR the past decade there were two more or less universally acknowledged truths about digital advertising. First, the rapidly growing industry was largely impervious to the business cycle. Second, it was dominated by the duopoly of Google (in search ads) and Meta (in social media), which one jealous rival has compared to John Rockefeller’s hold on oil in the 19th century.

Both of these verities are now being challenged simultaneously. As China’s economy slows and the West’s slides towards a recession, companies everywhere are squeezing their marketing budgets. Until recently, that would have meant cutting non-digital ads but maintaining, or even raising, online spending. With most ad dollars now going online, that strategy is running out of road. Last quarter Meta reported its first-ever year-on-year decline in revenues. Snap, a smaller rival, is laying off a fifth of its workforce.

For Meta and Google’s corporate parent, Alphabet, the cyclical problem may not be the worst of it. They might once have hoped to offset the digital-ad pie’s slower growth by grabbing a larger slice of it. No longer. Although the two are together expected to rake in around US$300bn in revenues this year, sales of their four biggest rivals in the West will amount to almost a quarter as much. If that does not sound like a lot, it is nevertheless giving the incumbents reason to worry. Five years ago most of those rivals were scarcely in the ad business at all. What is more, as digital advertising enters a period of transformation, the challengers look well-placed to increase their gains.

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