How Google and Facebook Have Taken Over thDigital Ad Industry

How Google and Facebook Have Taken Over the Digital Ad Industry

Worlds Most Admired Companies

How Google and Facebook Have Taken Over the Digital Ad Industry

Photograph by Chris JacksonGetty Images

The good news is that the digital-advertising industry is growing strongly, with revenues up sharply in 2016. The bad news? Virtually all of that growth is going to exactly two companies:Googleand Facebook.

The latest figures from the Interactive Advertising Bureaushow that the third quarterlast year was the biggest ever, with a total of $17.6 billion spent on digital ads. Thats a 20% increase from the same period a year earlier, thanks to growth in mobile and video. This growth reflects marketers trust in the internets power to connect with todays audiences, the IAB said.

If you look beneath the surface, however, it also reflects the fact that a majority of those audiences are controlled by Googleand Facebookand if anything, their control is accelerating.

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Last year, Pivotal Research analyst Brian Wieserestimated thatdigital advertising revenue in 2015 also soared by 20% from the previous year to a record of $60 billion. Close to 65% of that went to Google and Facebook, he said, with the search giant taking $30 billion and Facebook taking $8 billion.

Smaller companies will continue to operate in the shadows of the industrys two dominant players, Wieser told investors in a research note at the time.

Halfway through last year, Jason Kint of the advertising trade group Digital Content Next looked at the total ad revenue booked by those two companies as a proportion of the overall industry, andfound that they accountedfor about 90% of all the growth in the business.

Last week, Kint updated those figures, and the picture they paint has become even more bleak. Based on the IABs numbers and public financial numbers from Google and Facebook, the two digital giants accounted for about 99% of the $2.9 billion in advertising growth in the third quarterwith Google making up about 54% of the total and Facebook about 45%, leaving just 1% for everyone else.

updated duopolys. new IAB data came out yesterday. easy to run vs earnings for goog and fb, its evident everyone else is zero sum /wolgdpfcxp

Jason Kint (@jason_kint)December 30, 2016

This duopoly control has had an increasing impact on the advertising-tech market as well, something that used to be a growth area both for publishers and for ad networks. According to a recent analysis by theFinancial Times, both the number of financing deals and the amount raised by ad-tech companieshas declined sharplyin the past year.

The number of ad-tech companies raising money dropped 17% last year compared with the year earlier, data from CBInsights shows, and the total volume of funding fell 33% to $2.2 billion from $3.2 billion, putting it back where it was in 2013.

Ad techs struggle as a sector is absolutely to do with the dominance of Facebook and Google, Balderton Capital venture partner Suranga Chandratillaketold the FT. Ultimately advertising is about selling attention, and if most of that attention is focused on Google and Facebook, then naturally they can monetize it. He added:

Even if you manage to build a sustainable advantage for a few years, how do you scale to compete with Google or Facebook? Thats why traditional adtech does feel dead from a venture perspective.

In a recent interview with ad industry veteran Jay Sears, Pivotals Wieser said the digital-media industryhas effectively becomea giant duopoly in which Google and Facebook win almost everything, advertisers have to play by their rules, and other media companies fight for the scraps.

New York-based venture investor Fred Wilson, meanwhile, predictedin a forecast for 2017that the ad:tech market will go the way of search, social, and mobile as investors and entrepreneurs concede that Google and Facebook have won and everyone else has lost. It will be nearly impossible to raise money for an online advertising business in 2017.

This is how modern political advertising works:

In the past, digital advertising may have been seen as an add-on or supplement to traditional advertising markets, but that is no longer the case. According to estimates from eMarketer, spending on digital ads in the U.S. will likely grow this year to the point where it islarger than the amount spenton television, the former Goliath of the industry.

Data on users and their preferences and behavior is the Holy Grail for most advertisers, and the reality is that Google and Facebook have orders of magnitude more data than their nearest competitors, and more ways to slice and dice it.

In the case of Facebook, the company has more than 1.5 billion usersfar more than any other single media business commandsand it tracks what they see and click on in ways that most media companies can only dream of. And that means advertisers will continue to work with them even when they admit that their data was wrong,as Facebook has several times.

Twitter and Snapchat are trying to compete on the same playing field as Google and Facebook, but both remain bit players so far. So is the future for media companies simply one of deciding which of two giant walled gardens they wish to build a majority of their business on, or pay rent to? For the moment, at least, that appears to be the case.

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Facebook is broken

has become a feedback loop which can and does, despite its best intentions, become a vicious spiral. At Facebooks scale, behavioral targeting doesnt justit. Over time, a service which was supposed to connect humanity is actually partitioning us into fractal disconnected bubbles.

The way Facebooks News Feed worksis that the more you engage with posts from a particular user, the more often their posts are shown to you. The more you engage with a particular kind of post, the more you will see its ilk. So far so good! Its just showing you what youve demonstrated youre interested in. Whats wrong with that?

The answer is twofold. First, this eventually constructs a small in-group cluster of Facebook friends and topics that dominate your feed; and as you grow accustomed to interacting with them, this causes your behavior to change, and you interact with them even more, reinforcing their in-group status and (relatively) isolating you from the rest of your friends, the out-group.

Second, and substantially worse, because engagement is the metric, Facebook inevitably selects for the shocking and the outrageous. Ev Williams summed up the results brilliantly:

This is the best way I have ever seen expressed what leads to things getting so extreme online.

Robert Kosara (@eagereyes)May 20, 2017

Of course this doesnt just apply to Facebook. The first problem applies to all social networks with smart algorithmic feeds that optimize for engagement. Facebook is just the largest and most influential by far.

The second has been a problem with television for decades. Why have majorities or crazily large minorities of people believed, for many years, that violent crime justkeeps getting worse, that their hometown mall might be bombed by terrorists at any moment, that Sharia law will come to their province/state any day now, that the rest of the world is a war-torn shambles only barely propped up by vast quantities of aidwe cant afford despite the easily available, incredibly copious, clear evidence to the contrary? In large part because if it bleeds, it leads.

Fake news is far from new; its just become explicit rather thanimplicit. And I certainly dont mean to suggest that Facebook singlehandedly caused the terrible trend of demonizing any and all people with whom one disagrees. Studies show that political polarization ismore extreme in older people, who use social media less, than in the young. Whatevers happening is far more complicated than just Facebook is driving us apart.

Still we hoped the 21st century of Facebook would be better, more compassionate, more understanding, than the 20th century TV. But its not, and the ways in which its worse are far more personal. We hoped that making the world more open and connected would be good for us. Maybe it would be, if the metric that the connecting entity optimized for was something other than engagement. But it now seems fairly clear that engagement isnegativelycorrelated with happiness for users, and moderately clear that this is, in fact, a:

No matter what else Zuckerberg does for the world, the simple fact is his product makes millions of people worse off

Christopher Mims 🎆 (@mims)May 28, 2017

The analogy I like to use is global warming causing extreme weather: the more energy pumped into our atmosphere, the more it behaves in bizarre and erratic ways. Facebook is like a powerful greenhouse gas for our collective social atmosphere. TV was too, of course, but it was CO2to Facebooks methane.

I dont want to get into Facebooksprivacy issueshatespeechissues, ongoingrejection of all the principles of the open web, etc. Im not suggesting that this is anyones fault, or even that anyone has done anything wrong. Nothing like Facebook has ever existed before. It is a company that is also a massive global experiment, one with some excellent outcomes.

But it would be good for us all if Facebook were to at least acknowledge the possibility that at leastsomeof their experiments outcomes seem at best worrying and maybe even alarming and something should be done to try to mitigate them. As hard as that admission might be.

Epic corporate cognitive dissonance in conceding making the world more open and connected != an unalloyed good:

Jon Evans (@rezendi)April 18, 2017

Im happy to report that this may well be happening. See Mark Zuckerbergs recentcommentsto the effect that Facebook is working on a way to connect you with people that you should know like mentors. I hope this is the harbinger of a new understanding that Facebooks focus on optimizing for engagement is, in and of itself, harmful to its users and an understanding that its always best to head off a backlash before it begins, rather than after it gathers steam.

How to Advertise on Facebook The CompletGuide

Facebook advertising is a big and growing business: companiesspent more than $9 billionon Facebook ads in the second quarter of 2017 alone. Thats an increase of 47 percent (Nearly $3 billion) from the same period in 2016.

Bonus:Download a free guidethat shows you how to get the most out of your Facebook ad budget.Learn the tricks and tacticsthat will stretch your advertising dollars and improve ROI.

At last count, more thantwo billion peoplewere using Facebook. And those users are highly engaged with the content posted on the network: More than 800 million people like something on Facebook every single day.

Of course, when it comes to getting the biggest bang for your advertising buck, too large an audience can actually be a bad thing. After all, you only want to pay to expose your brand to people who might be interested in doing business with you. Fortunately, Facebook offers multiple layers of targeting, so you can focus your Facebook ads on exactly the right audience for your business to maximize ROI.

Well get into the specifics of targeting Facebook ads later on in this post, but for now keep in mind that Facebooks huge, global audience combined with the ability to target your ad by demographics, location, interests, and behaviors allows you to access the exact people who are most likely to want to buy your products or services.

Need more convincing? Consider this:95.8 percent of social media marketers worldwidesaid Facebook provides the best ROI of all social platforms.

Perhaps its no surprise, then, that close to two-thirds of advertisers worldwide plan toincrease their Facebook advertising spend in 2017.

Facebook offers 10 campaign objectives based on what you want your ad to accomplish. For each of those objectives, you can choose various ad formats based on your chosen goal and target audience.

Before we dig into some specific Facebook ad examples and the technical requirements for each format, lets take a quick look at how the different types of Facebook campaigns align with business goals:

: Encourage installations of your mobile or desktop app.

: Introduce your brand to a new audience.

: Get people to take a specific action on your website (like subscribe to your list or buy your product).

: Expose a post to a wide audience to increase the number of Likes, comments, shares, or photo views; increase your number of Page Likes; promote an event.

: Get new prospects into your sales funnel.

: Expose your ad to as many people in your audience as possible.

: Connect your Facebook ads to your product catalog to show people ads for the products they are most likely to want to buy

: Drive customers to brick-and-mortar stores.

: Drive traffic to a specific webpage.

: Show your video to a large audience to increase brand awareness.

This video provides more details about the campaign objectives.

Now that you understand the various Facebook campaign objectives, lets explore the various Facebook advertising formats.

Note: Since Facebook doesnt want peoples newsfeeds to be filled with text-heavy images screaming for attention, you need to keep your text overlays to less than 20 percent of your image. (This also applies to video thumbnails.) In fact, the less text there is on your image, themore widelyit will be distributed. Usethis toolby Facebook to check if your images contain less than 20 percent text.

Simple photo ads dont have to be boring. Dallas bookstore The Wild Detectives used photos ads with clickbait-style headlines to trick people into reading classic literature.

Posted byLitbaitsonThursday, March 2, 2017

The strategy worked like gangbusters: the bookstore saw a14,000 percent increase in site traffic, and the campaignwon a 2017 Facebook Award.

Facebook ad image sizes (thumbnail)

: Minimum width 600 pixels; match length to video aspect ratio

: Video aspect ratio of 16:9 (full landscape) or 1:1 (square) for all objectives; other aspect ratios available for specific campaign types

Video ads can create massive engagementif theyre done right. A video about bread could be, well, a little boring. Not this one! At the time of writing, this Facebook video ad for Daves Killer Bread had more than 2,500 shares and more than 1,200 comments.

If youre launching a new bread at the farmers market, it better be killer. DavesKillerBread NonGMO Organic

Posted byDaves Killer Bread Canadaon Wednesday, July 12, 2017

Activewear company Carbon38 found that compared to Facebook photo ads, Slideshow ads saw an85 percent increase in return on ad spendand had a 40 percent higher click-through rate.

Refresh & renew your wardrobe with our favorite spring pieces.

Posted byCarbon38on Tuesday, March 14, 2017

: Up to 10 photos or videos plus text

: All except post engagement and product catalog sales

: 40 characters (for images) or 25 characters (for video)

The knitting and crochet supply site Kitterly uses Carousel ads to retarget potential customers with products they have already viewed on the Kitterly website, resulting in a3.4 times return on ad spend.

When MeUndies launched a Collection ad, it increased its conversion rate by40 percent.

: An immersive ad format incorporating text, up to 20 photos, and video

: Brand awareness, conversions, engagement

: 66 x 882 pixels (header); 1080 x 1920 pixels (full-screen image)

The Montana Office of Tourism Development used Canvas to highlight the regions stunning scenery and ski destinations andincreased their click-through rate by 7.5 times.

Maserati USA used lead ads to collect 21,000 leads, resulting in sales of 127 vehicles.

For more great example of Lead Ads in action, check out our blog post onseven smart ideas to grow your business with Facebook Lead ads.

If you already have a Facebook business page (and you should), you canhead straight tothe Facebook Ads Manager to create your Facebook ad campaign. If you dont yet have a business page, youll need to create one first.

Choose your campaign objective based on the most important metrics for your business andyour goalsfor this particular ad.

Keep in mind that for conversion-oriented objectives you can pay per action, but for exposure objectives you will pay for impressions.

Remember: Effective targeting is key to maximizing ROIand theres no shortage of ways to target your audience on Facebook. In addition to targeting by location, gender, and online behaviors, you can hone your audience based on the following:

Connections: You can target people who are either connected or not connected to your Facebook Page. If you want to reach a new audience, underDetailed Targeting, choose select Exclude people who like your Page. If you want to promote an offer or new product, select People who like your Facebook Page to reach people who already know your brand.

Custom Audiences: You can build your own audience of people who have already interacted with your business on or off Facebook. Facebook has a goodstep-by-step guideon how to do this.

Lookalike Audiences: This lets you target people who are similar to your existing most valuable audiences.Heres howto set-up a Lookalike Audience.

For advanced Facebook ads audience research and targeting tactics, check out this video:

As you make your selections, keep an eye on the meter on the right side of the page, which indicates the breadth of your audience selection, and the estimated daily reach chart.

Next, you decide how much money you want to spend on your Facebook ad. You can choose a daily or lifetime budget, then set the start and end dates if you want to schedule your ad in the future, or choose to place it live right away.

You can get into pretty fine detail about how you want to spend your money using the advanced budget options.

Keep in mind that running your ad on a schedule may be the most efficient way to spend your ad budget, since you can choose only to serve your ad when your target audience is most likely to be on Facebook.

One option is to promote an existing post. If you would prefer instead to create a new ad, first choose your ad format, then enter the text and media components for your ad. Making sure you conform to the Facebook ad image sizes mentioned above for each format.

Use the preview tool at the bottom of the page to make sure your ad looks good for all potential placements (mobile, desktop news feed, right column, and so on). When youre happy with your choices, click the greenConfirmbutton to submit your order, then wait to get an email from Facebook notifying you that your ad has been approved.

Rather than placing each ad manually, withHootsuite Ads, you can create and test hundreds of ads in minutes, automatically boost budgets based on performance triggers, and control who can create and edit campaigns.

You can also choose organic posts to promote directly within the Hootsuite dashboard, so you can extend the reach of your best-performing content.

While Hootsuite Ads is an enterprise-grade solution,AdEspresso by Hootsuiteis a self-serve social ad management solution designed specifically for small and mid-sized organizations. It also allows you to create ads and monitor the results directly from the Hootsuite dashboard.

Keep these important strategies in mind to make the most of your Facebook advertising efforts.

Start with a narrow audience and then broaden it slowly by adding one interest category at a time. For example, you could start with an audience specifically interested in Napa Valley wine tours and then broaden after a few weeks, adding wine tasting, food and wine, and so on. That way, youll have a good idea of whats moving the needle.

If you have a local business, you can target your audience by zip or postal code. This is also helpful if you know a particular city or neighborhood converts well.

PRO TIP: Mikie Basi, a digital marketing strategist at Hootsuite, offers this advice: Always test different types of targeting to find the best audience for your products. Experiment with interest categories, friends of followers, and website audience lookalikes. Run them in separate ad sets to determine which is the top performer.

Ad fatigueor reduced engagementcan occur when people see the same ad too many times. Rather than bombarding your audience with the same ad over and over, switch it up so they are exposed to different elements of your brand offering. Facebookrecommendsswitching your ad once every one to two weeks.

Facebook ads are a perfect venue for learning what resonates best with your audience, from ad format to image style to hashtags to length of copy and tone of voice. Since testing is such an important topic, weve got awhole guide on how to do it.

A Facebook pixel is a small piece of code that can have a big impact on your Facebook advertising campaigns. Once you place the code on your website, it will allow you to track conversions, remarket to people who have viewed a product on your website, and create lookalike audiences.

Weve got a blog post to help you get set up with the Facebook pixel:The Facebook Pixel: What It Is and How to Use It.

You know what the goal of your Facebook ad isbut do your viewers? Including a call to action (CTA) ensures that the people who see your ad understand what the next step is in developing a relationship with your company. Check out our guide onhow to create effective CTAs.

You know whats a turnoff? Blurry photos. Or pixelated photos. Or jumpy videos that make you feel motion sick. Your words are important, sure, but your visuals are what will first grab viewers attention and create the first impression.

Make sure you comply with the Facebook ad image sizes for each format, specified above, for the best results.These free stock photo websitescan help you source high-quality images to use in your ads.

If you sell a product, Facebookrecommendsthat you try using photos showing people using and benefitting from your product, rather than an image of the product all by its lonesome.

Bonus:Download a free guidethat shows you how to get the most out of your Facebook ad budget.Learn the tricks and tacticsthat will stretch your advertising dollars and improve ROI.

Raring to go but not sure what you should promote with your Facebook ads? Weve put together three campaign strategies to get your started.

Unless youre a marketing magician, its pretty hard to get people to buy from you the first time you wave to them in a Facebook ad.

For products that take longer to sell, email is your best friend. Facebook makes it pretty simple to collect new email leads. With software such as MailChimp, you can send out automatic emails (say, one email every few days). This helps you build trust and introduce people to your brand before you pitch your product.

STEP 1: In Facebook Ads Manager, choose Lead Generation as your campaign objective.

STEP 2: When you create your lead form, choose fields that align with the fields on your email list. Keep it simple: first name, last name, and email address.

STEP 3: Use the tool Zapier to automatically send email sign-ups from your Facebook campaigns to your email provider, such as MailChimp. Youll need to sign up for a Zapier account and connect Facebook to Zapier.Heres a step-by-step guide for MailChimp users.

STEP 4: Do a quick test to make sure data is passing between Facebook and MailChimp.

STEP 5: Launch your ad campaign and watch the emails come rolling in. If you want to get more sophisticated, you can set up a custom automated email sequence in your email provider for Facebook leads. Below is a quick email strategy to use. You can sequence these emails a few days apart:

Automated Email No. 1Share something really valuable that connects to the problem your product solves (example: a food truck could share a map of all the best restaurants in the city). No product pitch. Just value. Youre training prospects to open your emails.

Automated Email No. 2Tell an interesting story that connects to your product. For example, the food truck could talk about how they couldnt find a good Pho/Italian fusion restaurant and so quit their corporate jobs and created their food truck, Pho Get About It.

Automated Email No. 3Share another valuable resource (such as five mistakes people make when cooking spicy chicken at home). No product pitch.

Automated Email No. 4Make an offer such as a discount for their first visit.

Automated Email No. 5Make the same offer again but tell an interesting and useful story as the lead.

The goal is always the same: train people to open your emails by offering valuable content and then make the occasional product pitch.

The Milwaukee Bucks NBA teamused this strategyto boost its season ticket sales. The team ran lead ads targeted to Custom Audiences of past season ticket holders, fans of their Facebook Page, and other existing leads.

They also used lookalike audiences modeled on current season ticket holders, while excluding current ticket holders so they would not waste ad exposure on people who had already purchased their tickets.

Finally, they used interest targeting (sports fans) and location targeting to make sure people who saw the ads would be interested in the team and able to make it to the games if they bought tickets.

The collected leads went directly into the teams CRM and kicked off a series of emails. After the email series, sales reps followed up in person with those who had not bought tickets.

The results? The team saw a25 percent higher email open ratethan usual and more than double their usual email click-through rate, with 33 percent of leads buying the advertised ticket packages and 20 buying upgraded tickets.

Every brand has a few killer pieces of content that drive the lions share of traffic each month. Adapting that content into a short video aimed at Facebook audiences can be a great way to repackage top content for Facebook ads.

STEP 1: Distill the key ideas from your content piece into a few key points you can express in a few words each, or think about ways to convey the same key messages through your visuals. Make sure your call to action matches your video content.

STEP 2: Use one of thesesocial video toolsto create your video, or createa slideshow video adin Facebook Ads Manager.

STEP 3: In Facebook Ads Manager, select Video Views as your campaign objective. Upload your video directly to Facebook and push the campaign live.

Repurposing great blog content as social video is a favorite strategy at Hootsuite, so you can see lots of great examples on theHootsuite Facebook Page. For instance, our video team repurposed this blog post onhow to optimize Facebook video to play without soundinto the following Facebook video:

PRO TIP: What types of videos work best on Facebook? How can you take someone from a video view to a lead or sale? We created avideo strategy kit for marketers, showing what types of videos work best on social media and what to measure.

If you have a good product, theres no reason why Facebook cant generate direct sales. But when asking for a direct sale, you need trustso if youre an unknown brand with an untested product, its probably best to test the first two Facebook advertising strategies first.

If youre confident that people will buy your product directly from a Facebook ad and you have a proven product with sales, test this strategy and be sue to measure your results.

STEP 1: In Facebook Ads Manager, select Conversions as your campaign objective.

STEP 2: Next, Facebook will ask you which type of conversion event you want to track, such as adding products to a shopping cart or adding payment information. Since youre trying to drive a direct sale, select Purchase. Youll need to install aFacebook Pixelto track a visitor from your Facebook ad all the way through your shopping cart process to purchase.

STEP 3: Create your ad with simple and clear copy. What do you offer and how is it different? Give people a reason to buy from this specific ad. For example, maybe you bundle another product as a freebie, or include a training webinar. You want people to stop what they are doing and click from your ad to your shopping cart.

STEP 4: Wait and track. Give your campaign at least two weeks before making any changes to copy or creative. Depending on your traffic volume, this should give you enough data to make an educated decision about whats working, or what changes you might want to test.

Charge Cords used Facebook ads todrive direct salesfrom new customers, using Custom Audiences to exclude people who had already bought from them in the last six months. They used Carousel ads with eye-catching product shots and compelling ad copy, along with a Shop Now call-to-action button. As the campaign continued, they updated the Custom Audience to target people who had visited the Charge Cords website.

The campaign resulted in a four times increase in sales from the targeted countries, and a four times return on ad spend.

PRO TIP: With remarketing, you can serve Facebook ads to people who have already visited your website. Your ads could include enticing offers, product recommendations, or funny reminders to complete their purchase. We cover remarketing with the Facebook pixel in our blog post on surprising ways tooptimize your Facebook ads.

Get the most out of your Facebook ad budget with AdEspresso by Hootsuite. The powerful tool makes it easy to create, manage, and optimize Facebook ad campaigns. Try it free today!

This is an updated version of a post originally published in May 2015. With files fromJames Mulvey.

Christina Newberry is an award-winning writer and editor whose greatest passions include food, travel, urban gardening, and the Oxford commanot necessarily in that order.

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