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As Rivals Stumble, Power Of Ad Duopoly Shown By Google And Facebook

As Rivals Stumble, Power Of Ad Duopoly Shown By Google And Facebook
The assumption that the digital advertising market is effectively a duopoly, a dynamic with deep implications for two of Silicon Valley's titans, was provided fresh evidence by quarterly results from Alphabet Inc and Facebook Inc.
While smaller rivals such as Snap Inc and Twitter Inc struggle to maintain growth and reduce losses, enjoying steep revenue increases and producing billions in profits during the most recent quarter were Alphabet, the owner of Google and YouTube, and Facebook, the world's largest social network.
According to research firm eMarketer, expected to take half of all revenue worldwide, and more than 60 percent in the United States this year are the Big Two in internet advertising.
No other digital ad platform has market share above 5 percent in the U.S. market.
Due to higher payments to mobile carriers and others for search traffic, Google suffered a minor blip in earnings. But little impact thus far has been felt by the efforts by Verizon and other network operators to compete for mobile ad dollars.
And also finding it tough to compete were independent advertising technology companies such as Rubicon Project and Rocket Fuel.
For the fact that they reach billions of people and have a wealth of data that can be deployed for targeted marketing, advertisers are flocking to Facebook and Google.
But, in order to maintain growth when the advertising market as a whole is expanding only modestly, questions about how they will use their billions in profits is raised despite their growing dominance.
"Digital advertising will soon be approaching a point of saturation, indicating that there are limits to growth which may not be fully accounted for by the investment community," Brian Wieser, senior analyst at Pivotal Research, said in a client note this week.
A crucial new frontier in the market is video which Facebook and Google both view as important. What they have long since done to traditional print advertising, the companies are preparing to do the same to the television advertising business with huge investments planned.
YouTube says that the service's overall 1.5 billion viewers watch, on average, 60 minutes a day on their phones and tablets and has been rolling out new series with stars such as Ellen DeGeneres and Kevin Hart.
After signing deals with companies such as Vox Media and BuzzFeed, Facebook is expected to launch original video series of its own within weeks. With video likely to be a big part of the mix, Facebook's Instagram unit is also becoming a bigger producer of revenue.
The massive reach of YouTube cannot be ignored, already, many advertisers feel. There was no evidence from Alphabet's earnings report on Monday that it had any impact on revenues even though some big advertisers launched a boycott of YouTube this year after their ads appeared alongside videos from Islamic extremists.
"Marketers aren't going to get fired for hiring Facebook and Google," said Harry Kargman, chief executive of Kargo, which manages digital marketing for media companies including Time Inc

Christopher J. Mitchell

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