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In a previous era, advertising was a vibrant industry. Every brand was trying to get its message out there, and they had countless channels through which to do it. Broadcast and print media both offered a wide range of different ways for companies to reach their intended audiences. Advertisers found themselves in a healthy, competitive marketplace.
That’s not so much the case anymore. The New York Times recently called attention to a serious problem that’s afflicting the ad industry in the 21st century: a lack of competition. We’re now looking at a virtual duopoly, as Google and Facebook are the two biggest players in the business by far. Their dominance has put a major hurting on everyone else looking to make it in the ad world, resulting in reduced competition and less room for innovation in the field.
Startup advertising businesses are dying out. Financing for such ventures reached a high of $2.92 billion in 2015, but in 2018 it’s on pace to be only half that. Terry Kawaja, CEO of LUMA Partners, told the Times that this trend is no surprise given the direction of the industry.
“While all industries go through a maturation curve, this one faces a particular need for consolidation,” Kawaja said. “So many of these companies were not profitable.”
It’s not that advertising as an industry is dying. In fact, the Interactive Advertising Bureau (IAB) found that overall spending on online ads has been steadily increasing, and it reached a high of over $88 billion last year. IAB also found, though, that 90 percent of all growth came from either Google or Facebook. The number of independent ad tech companies still in business has decreased by 21 percent since 2013.
There is still hope that more competition may come along and disrupt the Google/Facebook dominance. One possibility is a third mega-corporation like Amazon, but more interestingly, there is also talk of smaller players coming along to introduce pioneering new technologies. For example, the new ad platform SpotX is hoping that a focus on video advertising will set it apart from other hopefuls in the field.
“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,” said Kevin Hunt, the startup’s senior VP of global marketing.