@scleland: How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers

How much smoke and fire must there be, and how many people must get burned, before the fire department will investigate and put out a forest fire?

Apparently, a lot, if the forest fire is in the digital ad market that Google and Facebook dominate, and U.S. antitrust authorities are the firefighters.

Where’s the fire here?

Google and Facebook, which don’t directly compete in search and social, together dominate over 70% of the digital advertising market. They also dominate about 80% of online referral traffic, the online oxygen upon which every Internet publisher depends for survival.

After fiercely competing directly with each other in search and social in 2013 and 2014, Google and Facebook abruptly and quietly stopped competing against each other in 2014 with no explanation.

Since then, Google and Facebook have accelerated their capture of almost all digital ad revenue growth and profitability, exposing that Google and Facebook have become a de facto cartel that has illegally divided up the digital advertising space.

In 2014, Google and Facebook apparently decided they could each optimize their growth and profitability by colluding as dominant market complements to each other, rather than competing head-to-head as less efficient search-social competitors.

The economic motivation behind Google and Facebook’s apparent illegal market division is this.

Google takes more share of advertiser demand for lead generation and local business visibility – Google’s special dominance. And Facebook takes more share of advertiser demand for brand awareness and interactivity with consumers – Facebook’s special dominance.

The consumer specialization rationale behind Google and Facebook’s apparent illegal customer allocation is this.

Google takes more share of consumer demand focused on search for local, state, and national news, and the news verticals for business, technology, and job postings. Meanwhile Facebook takes more share of the news and content focused on social subjects like entertainment and lifestyle.

What’s the harm in Google and Facebook efficiently dividing up their markets and allocating customers — besides being per se illegal under antitrust laws?

Read the post on Precursor