Google, Facebook capture 74% of digital ad revenue

Advertising spend in Canada has been trending downward for several years, while at the same time two media companies have been gobbling up larger pieces of a steadily shrinking pie. Any guesses which two?

Google and Facebook, of course.

Google is by far the largest seller of advertising in the country, taking in 50.8% of all digital advertising revenue—and 25.3% of advertising across all media—in 2017.

Ranking second in digital sales is Facebook, which accounted for 23.5% of all online advertising in Canada. Together, the two companies account for 74.3% of all online ad spend (up from 64% just two years before).

However, one other media company beats Facebook for total ad sales. That would be Bell, which takes in 11.9% of ad spend across all media, compared to 11.7% for Facebook, a pure-play digital company (See below for the full list of companies and their ad revenue).

The data comes from two new reports from the Canadian Media Concentration Research Project (CMCRP). Both provide a deep dive into the numbers behind the key players in Canadian media and advertising.

Independent of any commercial interests, the CMCRP is supported by the Social Sciences and Humanities Research Council, with a mandate to analyze market concentration in media, telecom and the internet. Led by Dwayne Winseck of Carleton University, the research covers a broad range of sectors: Wireless, wireline, television distribution, radio, newspapers, magazines, advertising across all media and more—basically any business related to communications and content creation and distribution, from producers right through to the infrastructure providers. It’s what CMCRP refers to as the network media economy, and it was worth about $81.2 billion in 2017.

Of that total, about $13.6 billion was spent on advertising in 2017. On an inflation adjusted basis, that total is actually down from what it was five years before, said Winseck.

Ad spending on a per capita basis was $362 per person in 2017, down from $371 five years earlier. Winseck pointed to a pretty “lacklustre” economy since 2008 as one of the potential reasons for the slide. Advertising spend is a good economic barometer: It rises when the economy’s good, and slumps when it’s not. The possible good news would be a slight uptick last year. “So maybe we are coming out of something,” he said.

However, the drop in ad spending might also reflect the growing power and influence of digital. “Advertisers are getting more bang for their buck from digital advertising, so that is allowing them to claw back what they would have otherwise been spending,” said Winseck.

The reports contain a massive amount of revealing data from across the network media economy. Here’s just a few that help illustrate the power of Google and Facebook:

  • With a combined $5.03 billion in digital advertising revenue, the online giants dominate Canada’s $6.8 billion online ad market. “Whenever you have two Goliaths like that with a chokehold over the pipes leading to their audiences, that is a concern,” said Winseck. “We definitely have dominant market power and a real need, for a variety of reasons, to rein in that dominant market power”;
  • Facebook took in more than 10 times the Canadian advertising revenue of the Globe and Mail, and its revenue was more than that of all Canadian daily newspapers combined;
  • Google’s estimated revenue was more than 10 times the CBC’s advertising revenue across all media;
  • Google’s online advertising revenue was more than all TV ad revenue: $3.4 billion compared to $3.1 billion.

But while Google and Facebook dominate online advertising in Canada, the CMCRP says the Canadian advertising market is amongst the “most diverse and competitive” it has covered, with 16 companies controlling 78% of the total advertising spend.

We also asked Winseck to give us a few short answers to some big questions:

Is TV dying? “No. If you look at the totality of television… we see growth.” That means broadcast, along with speciality and streaming players.” What about broadcast TV? “In Canada, it is in dire shape.”

Can Canadian media compete with Google and Facebook? “No. I don’t think any advertising-based media can compete with Google and Facebook the way the current field is constructed. So what we need to do is deal with realities of Google and Facebook’s market dominance, [which is] underpinned by a lackadaisical regulatory framework.”

Who holds the power in the Canadian ad market: buyers or sellers? “I’d say sellers.” When you look at across the Canadian advertising ecosystem, three players in particular—Google, Facebook and Bell with 48.9%—control much of the inventory. “It is a very clear case where we have a very small number of sellers controlling the advertising inventory in this country,” he said.

*Bonus non-media question: Are our cellphone bills too high? “Yep. The first thing to be done is to recognize the problem. We keep seeing the industry deny the existence of the problem. It’s kind of like climate denial [except] these companies have high bill denial.” Ultimately, he says, the problem stems from the fact that Canada’s major wireless providers are controlled by the main internet providers. Canada hasn’t had a truly independent wireless option since Wind was acquired by Shaw. “We need a Vodafone or a T-Mobile.” – David Brown

David Brown