In our world of eye-popping stats, John Herrman recently shared a new one from a Morgan Stanley analyst that shakes the wobbly legs of the digital media industry in this New York Times column: “In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook.” Industry sources quickly tried to discredit this number as way too high even though for years many, including DCN, have noted overall market consolidation with this IAB/PWC report tracking the top ten’s growth from 70% to now 75% of the market.
But 85% to only these two companies?
Well, last week, IAB/PWC also released its quarterly U.S. advertising report, which was quickly followed by a “groundhog day” press release from the IAB, the industry trade group for the advertising sector, announcing the rapid rise of digital ad revenue. The Report notes that first quarter U.S. internet ad revenues hit a record-setting high after the highest growth in four years hitting a “21% rise over the same time period in 2015.” We don’t dispute this number. We just think it’s important to highlight that only two IAB members are benefitting from this increasingly lopsided ecosystem.
Using Facebook and Google’s public earnings, it’s very simple to back into the math. The table below illustrates the estimated U.S. ad revenue growth for Google, Facebook and what I affectionately like to call “Everyone Else.” These calculations show nearly 90% of the growth going to the two companies. If you’re in the “Everyone Else” group, you’re competing for $300 million of the $2.7 billion in Q1 growth.
Stop and let that sink in for a minute.