January 25, 2019

Duopoly ad world

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The New York Times reported, citing research by LUMA partners, that the number of independent ad tech companies decreased by 21% since 2013 to just 185 firms. Another indicator is the level of venture investment in ad companies. It reached its highest level of $3 billion in 2015, but the forecast for 2018 was less $1.5 billion. The number of deals between ad tech firms and investment funds fell steadily: 260 in 2014, 122 in 2017 and ju...st 53 in 2018 (according to Pitchfork). We wrote about or mentioned several acquisitions, instances of one fairly large ad company being bought by another, in 2018, such as AppNexus by AT&T, Datorama by Salesforce, Magento and Marketo by Adobe, etc. Companies buy working businesses to get new technologies, databases of consumers’ profiles, combined efforts of developers, etc. But all these players lag behind two super giants. Facebook (with Instagram) and Google (with YouTube) received about 90% of total digital ad spending in 2017. This means that other players got close to $9 billion from a total of $88 billion in 2017. Other players try to increase revenue and enlarge paths to attract more consumers and more advertisers. For instance, the forecast of Amazon revenue was $4.5 billion by the end of 2018 (an increase of 61% year-on-year) with the roll-out of its own advertising arm and search mechanism. And the profit of Amazon will be higher if the company engages users in the direct opening of its e-commerce platform, instead of their searching elsewhere. But the main question is in the fact that the number of companies that were innovators of new technologies in digital advertising has rapidly decreased in recent times. Maybe the decline of independent companies and innovative techniques is a result of natural processes in marketing. Or maybe we need to remember about antimonopoly laws in our history. Who knows?

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