The Facebook - Google Advertising Duopoly - Where they Differ?

© Lawrence W. Abrams, March 22, 2018

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Summary:

Facebook and Google differ fundamentally in the degree of adtech vertical integration.  Facebook only has a significant internal supply side platform (SSP).  Google has a significant SSP, ad exchange, and a demand side platform (DSP).

Facebook recognizes that its supply of ad impressions has reached a ceiling due to user annoyance of ads in their feeds.  With supply now inelastic within Facebook, there are three options open to increasing revenue -- quantity times unit price.

1. Get into selling impressions outside its "walled garden" which it has done through a retargeting business.

2. Assert its pricing power as a duopolist and just "shift up the supply curve" (i.e. limit ad impressions).

3. Work to "shift up the demand curve" of advertisers by sharing user data with independent DSPs to improve ad buy ROI resulting in a willingness to pay higher prices.

Option 2 exposes Facebook to antitrust lawsuits.  Option 1 and 3 are promising, but it relies on a sharing of user data with independent demand side platforms (DSPs) which has become problematic due to the Cambridge Analytica debacle.

We make the case for Option 3.