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How Google and Facebook dominate online advertising and searches
These are key findings and commentary from the Report, with my analysis and illustrations from the Report from travel and leisure businesses which use social media extensively to attract searches for and advertise travel, flights, tours and accommodation. Digital platforms provide a new advertising avenue Key finding Google and Facebook operate multi-sided platforms. On one side, they offer services to consumers for a zero monetary price in order to obtain consumers’ attention and data, which they monetise. On the other side, they sell advertising opportunities to advertisers. Advertising is the source of most of the revenue earned by the two major digital platforms in Australia. (Report section 2 page 58) Commentary Online advertising has helped businesses build a brand and following through social media. In particular, small businesses have benefited in advertising and reaching customers. Customers already using Google Search for generalised search queries would be inclined to also use Google Search for specialised search queries, such as information on travel services, including flights, tours and accommodation, because users display customer inertia. The same cannot be said of users of specialised travel services, so this source of traffic is not available to suppliers of specialised travel search services. (Report section 2.3.1) For these reasons, even when specialised search services have considerable reach, such as travel and hotel booking search services, Google’s general search service enjoys a competitive advantage over them. (Report section 8.4) Analysis This explains both the necessity and the effectiveness of paid advertising on social media, particularly for specialised travel service providers. Google and Facebook have substantial market power Key findings
Commentary Substantial market power has led to dominance in online
advertising expenditure. Analysis Travel agents and tour operators, hotels and resorts are hedging their bets by continuing to advertise in travel supplements in the print media and in brochures. Online, there are many powerful accommodation websites such as booking.com, airbnb.com, tripadvisor.com, hotels.com, expedia.com and trivago.com which attract travel searches and act as platforms for bookings. Potential for anti-competitive conduct by expansion into related markets Key finding Digital platforms with substantial market power have the ability and incentive to engage in leveraging behaviour which may affect competition in advertising and other markets. The risk of leveraging behaviour is increasing as Google and Facebook expand into other markets. (Report section 2 page 58) Commentary Google and Facebook have a strong history of expanding into related markets. For example, Instagram’s recent entry into online shopping (whereby Instagram directly facilitates the purchase of certain brands), Facebook’s entry into jobs and dating services, and Google’s entry into flights and hotels. (Report section 3.3.1) Google operates Google Flights, which provides users with the ability to search for flights, track flight prices and explore potential destinations, and shopping comparison service Google Shopping. (Report section 8.4) Analysis The ACCC is signalling that it will be vigilant about anti-competitive conduct by Google and Facebook such as misuse of market power and in mergers and acquisitions. Data collected is highly valuable Key finding In addition to the amount of time spent on the platforms, the breadth and depth of the user data collected by each of Google and Facebook provides them with strong competitive advantages. The multiple touch points that Google and Facebook each have with their users enable them to collect user data, improve their services, attract more users and advertisers, thereby creating a feedback loop. No other businesses come close to the level of tracking undertaken by each of Google and Facebook. (Report section 2 page 58) Commentary Why is Google’s data valuable? Search data, in general, is highly valuable as it provides very clear information about a customer’s desires. For example, a search for ‘Flights from Sydney to Japan’ reveals that the consumer is likely to be interested in flying from Sydney to Japan. A user may visit a number of travel websites that advise on activities to do in Japan, and this data can be tracked by platforms such as Google. (Report section 2.5.2) Analysis Personal information data collected from consumers is used by platforms to target advertising to consumers. Data privacy is a big issue. Challenges and recommendations for reform for small businesses The ACCC identifies challenges for small businesses who deal with Google and Facebook:
The recommendations made by the ACCC in the Report relevant to small businesses are:
(Source ACCC letter to small businesses) Analysis 98% (by number) of businesses in the travel industry are
small businesses. The ACCC recommendations will benefit
them. Marketing Commentary by Michael Field, EvettField Partners The Digital Platforms Inquiry – Final Report confirms what every small business owner and advertiser has known for years; that Google has substantial market power in supplying general search services and search advertising in Australia, and that Facebook has substantial market power in supplying social media services and of display advertising in Australia; and that it is unlikely to change in the short- to medium-term. So what can a small business owner or advertiser do to make their brand and market presence stand out in a highly concentrated and heavily dominated digital marketing landscape? Allow me to make some recommendations:
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