Google’s Outsized Share of Advertising Money

Sam Schechner and Keach Hagey, reporting yesterday for The Wall Street Journal (News+ link):

Google’s heft means the change could reshape the digital ad business, where many companies rely on tracking individuals to target their ads, measure the ads’ effectiveness and stop fraud. Google accounted for 52% of last year’s global digital ad spending of $292 billion, according to Jounce Media, a digital ad consultancy.

About 40% of the money that flows from advertisers to publishers on the open internet — meaning digital advertising outside of closed systems such as Google Search, YouTube or Facebook — goes through Google’s ad buying tools, according to Jounce.

I linked to this same story yesterday, when writing about Google’s opaque announcement about their advertising plans in a world where third-party cookies no longer work in Chrome. I’ve been thinking ever since about the size of these figures. Even if we take these estimates from Jounce with some sort of grain of salt, these are huge figures.

At a certain level it just doesn’t feel justified that Google should be involved with this much of the world’s advertising spend. Fundamentally, the money should be going from advertisers to content makers who are displaying the ads. Ad revenue should be, to some degree, commensurate with attention share. Google garners a humongous share of the world’s daily attention, but not half. Not even close. Google has inserted itself into the middle, yet is taking far more than a middleman-sized share of the money. It’s like finding out that half the money spent on TV advertising wasn’t going to the channels where the commercials appeared, but to the cable companies. Or that most of the money spent on newspaper ads — trying to reach newspaper readers — was going not to the newspapers but to the company that runs the presses where the papers get printed.

User tracking is fundamental to that. The desire to know as much information as possible about the audience for advertising has always been the Pied Piper lure of the industry. And Google’s ability — along with Facebook’s — to actually provide that tracking (or the fraudulent illusion of it) is what enabled them to gobble up such an outsized portion of the world’s entire ad spend. The ads that appear on Google’s own properties are one thing: search result ads and YouTube ads come to mind. But Google and Facebook’s share of ad revenue spent trying to reach people on non-Google/non-Facebook properties seems fundamentally inequitable.

What if the answer is that there’s no way for Google (or Facebook) to make the sort of money they’ve been making in a technology and cultural environment that has become deeply concerned with online privacy? I think it’s possible that we can have a world where our online activities are far more private, or a world where Google and Facebook can maintain their current outsized share of worldwide ad spending, but not both.

A world where Google sees, say, 25 percent of the world’s ad spending sounds like an amazing business, in principle. Unless you’re comparing it to the world we’re in today, where they see 50 percent — then 25 percent looks like a collapse. Privacy-invasive user tracking is to Google and Facebook what carbon emissions are to fossil fuel companies — a form of highly profitable pollution that for a very long time few people in the mainstream cared about, but now, seemingly suddenly, very many care about quite a bit.