Google-Meta duopoly continues to creak in their ‘heightened maturity’ as Amazon, Apple ascend

The same goes for Meta. It posted its first annual revenue loss in ad revenue.

Amazon and Apple, on the other hand, continue to aggressively rake in ad dollars — albeit into much smaller pots compared to Google and Meta.

The reason for this stark difference in fortunes? More like reasons — some structural, others economic. Bottom line: The unfair advantages that helped propel Amazon and Apple further into advertising are starting to manifest as real leverage for both businesses.

How fast they lean on this leverage remains to be seen. Whatever happens, it won’t be a complete overhaul of the status quo. Google and Meta have too much influence over ad dollars for that.

Even so, it’s clear that this influence is waning. It was doing so throughout last year when ad revenue was growing albeit slowly. The latest quarter did little to change this narrative. If anything, it sealed it.

Facebook’s earnings are a case in point. Its ad revenue growth was actually up 2% in constant currency terms over the fourth quarter, which sounds a lot better than the widely-reported 4% decline. And yet, it doesn’t change the fact that this is a slow-growth ads business now. Look at how fast it was growing during the pandemic, for instance. In the final quarter of 2020, ad revenue was up 31% on a constant currency basis.

The same goes for Google. Clearly, things are bad there when search ad revenue is down. It slumped 1.6% to $42.6 billion over the holiday season. Ad spending on YouTube continued to contract over the same period with ad revenue totaling at $7.9 billion, down 7.8% from $8.6 billion a year earlier.

In contrast, Amazon and Apple’s numbers were a lot more positive.

Amazon scooped up ad revenues of $11.6 billion in the fourth quarter, up 23% compared to the year prior. It’s the sort of high growth that can only happen in an ad slowdown to a business that has Amazon’s ability to supply advertisers with the most up-to-date intent signals possible.

Meanwhile, Apple’s services division, the part of the company that houses its ads business, made so much money over the final three months of 2022 that it set a new record of $20.8 billion. This was a double digit increase on a constant currency basis compared to the same period in 2021 when it rose 24%, said the company’s CFO Luca Maestri.

Needless to say, the shadow both Apple and Amazon have cast over ad dollars is getting longer by the quarter.

No, this doesn’t mean they will have ads businesses as big as Google or Meta anytime soon — at least not in sheer dollar value. Rather, it’s the growing influence of Amazon and Apple’s respective ads businesses that defines their net worth. Whether it’s Amazon integrating its ads business more closely to its cloud technologies or Apple making it harder for rival companies to offer effective advertising, these companies are having an outsized impact on the market relative to the size of their ads business.

“Google and Meta aren’t going away but there is going to be a realignment in terms of spending of dollars out of those businesses into younger ads businesses,” said Paul Verna, principal analyst at the advertising and media practice at Insider Intelligence. “The ad market overall is going to become more diverse across more players with smaller-sized businesses to the traditional duopoly of Google and Meta.”

To be fair, all momentum stories end — even one as relentless as the Google-Facebook duopoly. It’s the abruptness at which this slowdown has happened that’s surprising. There are a few reasons for this, but none are as fundamental as the fact that these companies got nudged toward inflection points in their ads businesses faster than anticipated.

YouTube dominated CTV dollars and had a place in the cultural zeitgeist that was unrivaled. Both changed once streaming services realized they needed ad dollars and TikTok popularized short-form video.

Meta, on the other hand, underestimated Apple. It knew the tech company would punch a hole in its business when it made it harder for the platform to show marketers how well their ads performed, but arguably underestimated how big a hole it would be. Two years on and the company still hasn’t recovered from the gut punch.

“We’re seeing the engines of digital advertising that powered the scaled web 2.0 businesses, from video platforms to social networks reach heightened maturity,” said IAB Europe chief economist Daniel Knapp. “Those businesses aren’t outperforming digital ad growth anymore.”

The subtext being that a duopoly that seemed unassailable isn’t. Gone are the days when Google and Meta were immune to the trials of other media. They can’t shrug off blips in the broader economy like they used to because there are so many companies pouring a large amount of their ad dollars into those businesses. In a pinch those same advertisers are going to need to cut those investments to save money. The bloom is off for the duopoly as the competition moves in.

Not that the top brass at Google and Meta believe this. On the contrary, they’re already trying to jumpstart their stuttering ads businesses. In the short-term to medium-term those efforts are predicated on artificial intelligence. It’s going to be, according to platform bosses, to build more privacy-centric ad tech.

“In our broader ads business, we’re continuing to invest in AI and we’re seeing our efforts pay off here,” said Mark Zuckerbeg, CEO of Meta. “In the last quarter, advertisers saw over 20% more conversions than in the year before. And combined with a declining cost per acquisition, this has resulted in higher returns on ad spend.

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