The market share of Meta Platforms and Google in the global digital ads market keeps dropping, a new report from Insider Intelligence suggests, with the two companies amassing 43.9% of the pie as of this year compared to 54.7% back in 2017.
The report reflects more aggressive efforts from companies such as Amazon (AMZN) to tap into this $300 billion market after the company founded by Jeff Bezos realized that they could use the vast amount of data they hold from their consumers to create a powerful advertising platform.
Meanwhile, other large online vendors such as Netflix (NFLX) are dipping their toes into advertising as well as a result of the launch of an ad-supported subscription. The Los Gatos-based video streaming service will be partnering with Microsoft (MSFT) to sell its adverts.
Another largely unnoticed up-and-coming player in the ad space is Apple, whose revenues from this business segment may reach $7 billion this year. Even though its market share in the global ad business remains negligible, the company’s efforts are already producing more money than Snapchat and Pinterest combined.
New iOS Privacy Feature is Considered a Headwind for Digital Ad Industry
The head of Meta Platforms (META), Mark Zuckerberg, blamed Apple’s new iOS privacy features for the slowdown that its ad business is experiencing. Users are now able to opt out of having their data harvested by third parties.
Zuckerberg estimated back in February that Apple’s new “App Tracking Transparency” feature will cost its company around $10 billion this year alone. Some early reports on the app’s usage indicated that as much as 95% of the users who downloaded it opted out of being tracked.
In January 2022, Apple reported that there were nearly 2 billion active iPhones in the hands of users. This implies that a significant number of people may have or could soon opt to keep their data private. This would have a significant impact on the advertising business of most social media and tech companies as they rely on thousands of data points to power their platforms.
Meanwhile, regulators across the world have stepped up their efforts to crack down on the duopoly that Meta and Alphabet have on the digital ads market. According to a group of US state attorneys, the two companies rigged ad auctions and acted as a cartel to fix prices.
Both companies denied these accusations but investigations have continued their course. Separately, the European Union has pushed forward a new legal framework called the Digital Services Act that aims to regulate the operations of very large online platforms (VLOPs) and very large online search engines (VLOSEs).
Insider Trimmed its Forecasts for Digital Ad Vendors due to Economic Headwinds
Earlier in November, Insider Intelligence, trimmed its forecast for global ad spending from $602.25 billion to $567.49 billion citing lower demand from Chinese companies due to “tougher regulations and economic headwinds” and a worldwide economic turmoil caused by multiple factors including high commodity prices, geopolitical tensions, and rising interest rates.
This year, the company expects that Meta’s ad revenues will drop for the first time in history. The report stated that Meta is “no longer an innovative groundbreaker” and called Zuckerberg’s decision to change the company’s focus to develop the so-called metaverse an effort that “has jeopardized the near-term health” of the business.
Meanwhile, Elon Musk’s acquisition of Twitter has also hurt the social media platform’s top line and has prompted Insider to trim its forecast for the firm’s revenues by as much as 39.1%.
The least affected of the group tracked by Insider, which also includes Snapchat and Pinterest, would be Google (GOOG), whose ad business will be the less severely hurt by this expected economic downturn while Amazon’s growing advertising unit is now expected to produce revenues of $55.99 billion – a 12% downward revision compared to Insider’s Q1 2022 predictions.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Comments