Google, Facebook Leave Rivals Struggling for Digital ‘Nirvana’By and
Search engine and social network dominate advertising spend
Methuselah Advisors’ John Chachas speaks on Bloomberg TV
As digital media giants Facebook Inc. and Alphabet Inc.’s Google dominate online advertising dollars, traditional media companies may need to look elsewhere for growth, according to a top media investment banker.
“If they’re getting all the growth, if no one else is growing, maybe we’ve sort of hit a new plateau where media has changed,” John Chachas, managing partner at Methuselah Advisors in New York, said of a few large digital media players during an interview with Bloomberg TV Monday. Digital media “may not be the nirvana that everybody thought,” he said.
Google and Facebook jointly accounted for 90 percent of U.S. ad growth in the first quarter of 2016, according to a study by Jason Kint, CEO of Digital Content Next, a trade organization for digital content companies. All other companies, combined, competed for the remaining $300 million of $2.7 billion in total ad growth, he wrote.
A flush of advertising dollars and growing consumer engagement has drawn traditional media companies, such as magazine publishers and newspapers, toward online and mobile platforms. That’s brought them head to head with digital behemoths like Google and Facebook, who have the user base and data to attract the lion’s share of advertising spend, leaving little room for newer entrants.
In 2015, Google and Facebook combined claimed 64 percent of the U.S. digital ad revenue, according to Pivotal Research analyst Brian Wieser.
Donning a pair of Snap Inc.’s spectacles, Chachas said it’s still unclear whether the younger generation’s appetite for online video will be a fruitful medium for advertisers. The data behind Google and Facebook’s market share is nonetheless compelling, he said.
“The investing community is going to have to really stare at these and figure out where it wants to deploy money,” he said of the data.