Jul 25, 2019

Tech giants still crush the ad market despite looming threats

Data: eMarketer and Zenith Media; Chart: Axios Visuals

Despite ongoing efforts to reel in the dominance of Big Tech companies, a few major firms still manage to eat up more ad revenue than most other publishers (and publishing industries) combined.

Why it matters: The continued strength of these companies, particularly in the data-based advertising sector, has shifted the focus in Washington over the past three years from holding firms accountable for bad policies or sloppy mistakes to taking action against them as monopolies.

Driving the news: The Justice Department announced Tuesday that it will probe the market power of online platforms in the social media, search and e-commerce spaces — presumably companies like Facebook, Google and Amazon.

  • On top of that, Facebook said in its earnings report Wednesday that the Federal Trade Commission (FTC) told it in June that the agency had opened a separate antitrust investigation into the company. 
  • Earlier that day, the FTC announced a record $5 billion settlement with the social giant over violating a previous privacy agreement.

Meanwhile, the businesses of the three biggest ad giants continue to grow, although concerns are starting to rise about future growth slowing down.

  • Facebook reported positive advertising growth during its second quarter earnings report Wednesday, and saw its stock pop in response. But the company warned that there will be "pronounced deceleration" in the fourth quarter and into 2020, "partially driven by ad targeting related headwinds and uncertainties" associated with privacy regulation.
  • Alphabet, the parent company of Google, is expected to again disappoint investors Thursday when it reports its second quarter earnings after market close. The company reported slowed advertising growth for the first time in its last quarterly report, and it's expected to continue in that direction. Alphabet makes the vast majority of its revenue from Google ads.
  • Amazon, which has the fastest-growing advertising business of the three companies, is expected to continue to grow its ads business at a strong pace this quarter, even though that business is still tiny compared to that of Google and Facebook. But Amazon's main focus for now is still driving e-commerce sales on its site, so most of the ads it sells are to merchandisers looking to promote their products on Amazon's platform. That category of ads can only grow as fast as Amazon's commerce business, so it's exploring other types of ad revenue, like video ads and sponsorships.

The big picture: As these companies continue to grow their advertising footprints, legacy businesses are consolidating in an effort to simply keep up. This week:

  • Newspapers: Reports surfaced this week that Gannett Co, the largest newspaper owner by circulation in the U.S., and its rival GateHouse Media, the largest newspaper owner by number of papers in the U.S., are currently in talks to merge, which would mean that one group would own 1 in every 6 newspapers in the country.
  • Telecom: The DOJ is poised to approve a mega-deal this week that would allow mobile giants T-Mobile and Sprint to merge, while divesting enough of their assets to Dish Network Corporation to become the new fourth major U.S. mobile provider.

The bottom line: The onslaught of regulatory action against some of the world's biggest advertising giants has yet to significantly slow their growth, and it's unclear whether the threat of strong antitrust action will be enough to do so, either.

Go deeper: The antitrust vise tightens on tech

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Alphabet stock rises on earnings beat

Photo: David Paul Morris/Getty Images

Stock for Google's parent company, Alphabet, was up over 6% in after-hours trading Thursday after the company reported that it met Wall Street expectations revenue and earnings per share.

Yes, but: The company continued to report major losses for its "other bets" category, which includes Alphabet-owned side projects like Waymo and Verily. In total, Google lost nearly $1 billion dollars on its moonshot projects.

Go deeperArrowJul 25, 2019

The rise of advertising activism in the Trump era

Illustration: Aïda Amer/Axios

An increase in boycotts, threats and blacklists under the Trump administration is putting pressure on corporate America to be more selective with their marketing dollars.

Why it matters: A new era of advertising activism has exploded with Trump, pointing to the increasingly large role that advertising plays in supporting a healthy information ecosystem and democracy.

Go deeperArrowAug 20, 2019

The end of tech's laissez-faire era

Illustration: Sarah Grillo/Axios

This week's series of big government moves against big tech platforms dropped a curtain on the era of hands-off regulatory policy that shaped the firms.

Why it matters: A generation of firms led by Google and Facebook that grew rich and powerful while the Feds stayed out of their way must now adjust to government action as a way of life. Meanwhile, legislators and regulators will have to figure out how to protect the public while preserving the industry's vitality and creativity.

Go deeperArrowJul 25, 2019