Google, Facebook… how are the others keeping up?

If a butterfly flips its wings in California, it can set off a tornado in France. Since the GDPR‘s enforcement on the 25th of May, the French Programmatic ecosystem has been experiencing the butterfly effect first hand.

In its Mountain View offices across the Atlantic, Google then decided, without prior consultation, to conform its programmatic solution to the new framework imposed by the IAB, with an in-house solution to manage the consent of Internet users. An issue arises: this Google CMP is incompatible with the market’s other existing solutions. Consequence in France: an earthquake!

The shortfalls are colossal and unfair: even players who had obtained the consent of their Internet users are excluded and therefore prohibited from buying online advertising space. Some advertising networks lose more than half of their revenue in a few hours: DoubleClick Bid Manager, Google’s solution (now renamed Google Ad Manager), which holds 25% of the programmatic market, has cut off their access. Half of the bids disappear and with them 50% of the business of some SSPs. “This event is clearly an illustration of the hegemony of the web giants Google and Facebook and the dependence of the market!” storms Sylvia Tassan Toffola, president of the SRI, the French union for Internet advertising networks.

The French market also seems quite irritated by the American giant’s lack of consideration for local players… This is an unprecedented event, for the main trade unions representing the profession – UDA, Udecam, SRI, Geste, IAB France – to make common cause against Google. Their open letter to the American firm last June expressed concern about the advertising economy’s technological dependence on Google and urged the company to face its responsibilities as a leader.

Crumbs to share

Google and Facebook have made their mark in advertising. According to eMarketer, the duopoly accounts for nearly 60% of the online advertising in the United States. And even more so in France. According to a French study conducted by the SRI and Udecam, the two giant companies already capture no less than 78% of advertisers’ investments in search and display (banners, videos, etc.). Only 22% of the advertising money remains, or about 800 million euros, to be shared for the others.

On mobile, the domination is even more impressive with a 93% market share. And last year, the duopoly captured almost all (92%) of the growth. “Google and Facebook share the cake and the others the crumbs,” says David Pironon, chief programmatic officer of French ad server Smart, and current treasurer of the IAB in France. It must be said that “they are involved throughout the value chain,” says David Baranes, co-founder of Armis, a start-up developing a multi-local advertising technology. “These platforms don’t just have the largest data volume – they also provide tech solutions that are very user-friendly, highly effective and that brands can roll out at an international scale.”

All eyes on Google and Facebook

If the duopoly crushes the market in terms of numbers, it also holds the attention of advertisers almost exclusively. “It has become very difficult to justify budgets that come out of this duopoly,” says Hugo Loriot, head of fifty-five in the US. Their power of attraction is so strong that everyone thinks above all of succeeding with their Google or Facebook strategy. Finally, there is no more time and energy left to focus on other actors.”

So how does the ecosystem react to this? First, the vast majority are concerned about such dependence. Some people talk about a threat to the whole ecosystem. Others, of a “distorted market”, by pointing out in particular the controversial tax regime of the two firms. And some even openly state that it is a priority objective to squeeze the two giants. “Many complain, but even Facebook and Google critics work with them,” says David Pironon. “They are both partners and competitors. It’s what we call coopetition.”

The relationship with Google and Facebook is quite unique, ambiguous and delicate. “In reality, the main market players are feeding a machine they deplore. They are pyromaniac firefighters,” says Vincent Pelillo, the French general manager of Captify, a company specialising in search intelligence, data and activation. However, neither antiduopoly bashing nor the volume of investments made are justified. According to him, one of the difficulties is that addiction is a vicious circle from which it is difficult to escape. “Dependence is an ever-increasing phenomenon: it is much more practical and economical to consolidate what is already there, especially when it works rather well, than to break everything”, he says.

A natural selection

What are the effects of this hegemony on the market? First, concentration that could be compared to the Darwinian theory of natural selection. Especially since “in the Adtech field, 30% of the companies that are created go bankrupt within eighteen months,” says Vincent Pelillo. Then, how to exist in such a concentrated market?  Well, bigger is better: the players in the sector embark on a race for size. And the great manoeuvres have already begun. Among others, Yahoo! acquired last year by Verizon and more recently AT&T which bought AppNexus.

Closings likely to rebalance the market? Not according to Hugo Loriot. “Even Amazon, which is making a huge breakthrough on the online advertising market, will remain far behind in the short and medium term,” he predicts. What about other technology companies, SSPs and other DSPs, App-Nexus for example? “In Europe and France, they do not have AT&T and its striking force in terms of advertising inventory behind them and will therefore not have the means to change the situation,” says Hugo Loriot. Little discussed about the impact of the pre-eminence of the duopoly on their business, these players are all thinking about a cross-domain and Cross-device identifier that could rebalance the market. But Clustering initiatives such as the Advertising ID Consortium launched in 2017 – AppNexus, LiveRamp and MediaMath came together to think about unique identifiers – seem to have been short-lived…

Beyond this consolidation trend, both advertisers and publishers are looking for alternatives to the duopoly. Especially since the first ones realised that the promised KPIs were not necessarily there. And the problems followed one another: Facebook repeatedly acknowledged mistakes in its audience measurements, and Google with YouTube exposed many ads in inappropriate contexts. Not to mention the Cambridge Analytica-type scandals that have chilled some players. Marc Pritchard, the Chief Brand Officer of the powerful Procter & Gamble, reported that his group had cut digital spending by 30% to 50%, particularly on YouTube and Facebook. Bugs, bad user experiences, lack of transparency… there is now a myriad of complaints. And an in-housing movement to better control digital campaigns and control media buying is beginning to emerge.

Joining forces

One of the answers to reassure advertisers in France (and put pressure on the duopoly) is called Digital Ad Trust. Created at the beginning of 2018, this label is the result of an unprecedented inter-professional alliance between the French associations SRI, Udecam, Geste, UDA, ARPP and IAB. It aims to promote media inventories around five criteria: brand safety, personal data protection, ad visibility, user experience and fraud. 78 sites have already been labelled for a 87.5% reach and 46.1 million unique visitors. For Sylvia Tassan Toffola, “If we want to rebalance the market, the key lies in quality, value proposition and the union of forces. Having a critical mass is a decisive issue. ” The label hopes to have around 100 certified sites by the end of the year, which would represent more than 80% of the inventory of available media sites. On the publisher side, the Skyline and Gravity alliances illustrate the willingness to take control of inventories and the programmatic ecosystem.

“All these initiatives are moving in the right direction, but remain too scattered, says Vincent Pelillo. We should be careful that they do not end up competing with each other. To really fight Google and Facebook, all publishers would have to agree to create a common identifier. “In the meantime, the domination of the two giants goes on and on. And, according to research firms, it should continue this way. They are so far ahead of their competitors that the only way to break this duopoly would be unlikely political decisions by the American administration, says Hugo Loriot. But concerted pressure from stakeholders may force them to be more open when it comes to measuring and sharing data.”

Better than nothing!

This article was written by Lionel Lévy and published in its original French version on the Strategies website.