Duopoly: Facebook and Google Market Dominance Pushes Out Ad-Tech Firms

Facebook chief Mark Zuckerberg said the company is handing over information on Russia-linked political advertising to congressional investigators, after agreeing to give the data to a special prosecutor
AFP

According to a recent report, advertising technology firms are increasingly being pushed out of the market by large tech firms led by Facebook and Google.

The New York Times reports that while online advertising companies have suffered for years as Google and Facebook further solidified their position in the online advertising market, now it seems that advertising technology companies are also beginning to suffer. Ad tech companies specialize in gathering data on consumer preferences and habits which is then used by advertising firms to develop their campaigns. Now with the growing influence of advertising tools from Google and Facebook, these companies are slowly being pushed aside.

According to LUMA Partners, a group which analyzes digital media and marketing, the number of functioning independent ad-tech companies has fallen by 21 percent since 2013 with only 185 firms operating during the second quarter of 2018. At the same time, investment into ad-tech companies by venture capital firms is falling rapidly, financing for such startups reached an all-time high of $2.92 billion in 2015 but in 2018 that number is expected to be cut in half according to financial research firm CB Insights.

Larger companies have begun to buy out smaller ad-tech firms as they attempt to improve their own user analytics, AT&T purchased the ad exchange company AppNexus in June, at the same time Vista Equity Partners bought a majority stake in Integral Ad Science. The marketing division of the data aggregator Axciom was also purchased by the Interpublic Group for $2.3 billion in July. Some of these companies can be extremely valuable but with larger corporations purchasing the most popular firms, smaller startups are being pushed out.

Terry Kawaja, the chief executive of LUMA Partners, said in a statement: “While all industries go through a maturation curve, this one faces a particular need for consolidation. So many of these companies were not profitable.”According to Ari Paparo, the chief executive of the ad tech start-up Beeswax, venture capital funding for ad-tech startups began to decline in the past two years: “The private market is influenced by the public market, and you saw so many fail as publicly traded entities,” said Paparo.

Many involved in the industry fear that as investment disappears, innovation in the sector will die out with many clients being happy to use the tools provided by Facebook and Google. Doug Knopper, a founder of ad tech platform FreeWheel which was sold to Comcast in 2014 stated: “There’s still more innovation to come, but if V.C.s don’t put money into it because they don’t see a path to exit, does innovation stall?”

Some believe that the solution to breaking up the Facebook and Google duopoly is to add a third giant tech firm to the mix, that giant being AT&T. Eric Adelman, the president and one of the founders of Three Pillars Recruiting, said that AT&T’s acquisition of AppNexus could make them a rival to Google and Facebook. “Having three giants in the industry is much better than having two giants,” stated Adelman.

The Senior Vice President of Global Marketing at SpotX, Kevin Hunt, believes that his company’s focus on video advertising could help them to stand out amongst others in the industry:“It’s important for companies who are in this space to be technically flexible, to make sure they have built a solid foundation that allows them to move as technology moves,” stated Hunt.

Ben Barokas, an ad-tech executive that sold his company, Admeld, to Google in 2011 stated his belief that while Google and Facebook are acquiring ad-tech companies at a growing rate, those that persevere could still see success: “I think certainly Facebook and Google are hoovering up the vast majority of growth,” stated Barokas. “That said, I believe in independent content creation. Those who invest appropriately are going to also win and attract advertising dollars.”

Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan_ or email him at lnolan@breitbart.com

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