Waking Up to Duopoly Reality

May 09, 2017

For reasons that are beyond me, publishers only now seem to be waking up to the grim reality of digital media economics. In the past few months, analysts and industry associations have been talking up the problem of the digital duopoly—that most of us scramble after ad revenue table scraps left by Facebook and Google. Really? Now this is a thing?

Publishers are realizing that upward of 75% of digital ad spend goes to two companies that get almost all of their content for free from those same publishers. Premium content trade association Digital Content Next (DCN) did its own calculation recently to show that without Google and Facebook in those otherwise rosy quarterly reports on digital ad growth, the real online ad economy for other publishers may be growing at a 1% rate. DCN CEO Jason Kint told me recently, “It’s a completely unhealthy marketplace, considering the industry continues to pump out press releases bragging it’s growing at 20% year-over-year. It’s simply not true.”

I have been writing this column for more than 15 years. In that time, the Follow the Money directive has always led to a dark place. In the early-to-mid-2000s, it was the fact that the online ad economy was really a search economy, where Google and Yahoo siphoned off most of the money. In the mid-2000s, everyone complained about the low valuation (remember “digital dimes”?) of new advertising formats and banner blindness.

Most of these publishers are smart people. It is not that they didn’t see what was happening all along—that digital distribution was replacing content and context as the primary gatekeepers. I suspect it was that they thought the pie was growing fast enough (and that their value proposition was superior enough) to sustain their business on table scraps. What may be different this time is the group realization that Facebook and Google will continue to jerk the publishing industry around with their devil’s bargain: trade barely monetizable traffic for premium content that costs you (not us) a lot to produce. They will continue to pay lip service to valuing premium content over all others, but they (and you) know there are tons of startups willing to fill the content void if marquee brands pull out of the feed. And these gatekeepers will continue to switch up the algorithms and the product mix so the business model and content strategy you staffed up to satisfy 6 months ago could become irrelevant at the flick of a switch.

Waking up to the duopoly reality results in predictable responses among major media. Native advertising, marketing services, events, video, and renewed emphasis on direct subscriptions have all become life preservers for a sinking media business model. Many of these approaches may work to varying degrees for select publishers. In reality, many familiar media brands will fail, continue to shrink markedly, or sell off for pennies on the dollar.

Sorry. I wish I could be more optimistic. But part of the problem is that many content providers spent years expecting to share in a burgeoning digital ad stream that, in truth, was headed elsewhere. And the realities of media consumption, consumer taste, quality, and acceptable experiences in a fragmented, cluttered, short-attention-span digital environment are not pretty.  

The move from a media economy driven by content and context to an attention economy has negative consequences, inevitable as it may seem. True, Facebook and Google get a higher fraction of our fragmented attention than any specific media brands outside of TV and Net-flix. But it is still a mere fragment. And the experiences within Google and Facebook are basically poor and hodgepodge—functional, but not pleasant. Quality content may not float to the top when the content nearest at hand is good enough for undemanding algorithms.

I don’t know the answer. But I do know this about the duopoly: It has solved only for scale and data. Publishers trying to compete with these Goliaths on those terms do so at their peril. They have not solved at all for so many things audiences crave: quality, consistency, experiences, focus, personality, relationship, respect, transparency, trust, predictability, depth, warmth, comfort, and intimacy. All of the qualities I just described are characteristics of people, not machines—entities with faces and personalities, not platforms.  

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