Over the past few years, Google and Facebook have made a lot of headlines for dominating the global digital advertising market, with critics labeling the two a “duopoly.”

Despite research showing that Google’s share of the market is gradually declining, the pair still outstrip every competitor. In fact, eMarketer predicts that Google and Facebook combined will own 52.8% of the US advertising market this year, while the UK’s Competition and Markets Authority (CMA) estimates that the pair collectively enjoy around 80% of the digital advertising market that’s valued at around £14 billion.

Nothing seems to be changing in a hurry, and yet some analysts are seeing small signs that the tide is indeed turning.

How the duopoly came into being

A glance at this leaderboard for the top ten most downloaded apps for Android in the US goes some way to explaining how Google and Facebook reached this point; every single app on the leaderboard is owned by one of these two companies. In addition, Google owns another four apps that feature in the rest of the top 20.

While each of the apps serves a slightly different purpose, the resulting app store domination gives the companies a huge advantage when selling their ad inventory.

Both companies, as well as other online giants like Amazon, cemented their positions in gradual steps. First they established dominance in their vertical, then they set out to buy out competitors, and finally they sent out tentacles to acquire businesses in neighboring verticals.

The rise of Google as an app publisher

Google’s ascendancy depended on its speed at becoming the default search engine. Today, Google accounts for 90% of the world’s searches overall, and 95% of those on mobile, making Google search text ads incredibly powerful since they can target solution-aware prospects who are looking to make a purchase, at just the right time.

Of course, it helps that Google apps, including Google Search and YouTube, come preloaded into every Android device, adding to the company’s advantage. Indeed, Google’s 2005 acquisition of the Android mobile operating system set the stage for the company’s growing domination of digital spaces across devices.

The parallel ascendance of Facebook

As one of the first social media platforms, Facebook got an early lead in capturing users, but the company has monetized its audience well. Today, Facebook is the most-used social media site by number of active users, and when you add active users on its satellite platforms Instagram, WhatsApp, and Facebook Messenger, all of which are primarily used on mobile, the company far outstrips the next contender.

When Instagram threatened Facebook’s position in 2012, Facebook promptly acquired it and used it to enhance Facebook’s advertising empire, introducing Instagram ads and shoppable Stories to convert it into a direct advertising platform.

The power of Facebook was demonstrated even more in May 2021, when Facebook Messenger became only the third non-Google app to reach 5 billion downloads in the Google Play App Store for Android. Facebook remains the only company besides Google to have crossed that threshold.

Data dominance secures advertising revenues

At this point, Google and Facebook own such a wealth of data about almost the entire global population that they can offer targeted advertising that is more accurate and has a higher RoI than any competitor that’s still trying to gain on them.

“The main theme that ties them all together is the emergence of data as key to unlocking success in marketing,” said Andrew Frank, a vice president at Gartner. “It’s all about the data, and the fact that the data is concentrated in these particular companies gives them tremendous power. Collectively they account for the strong majority of resources that retailers are putting into digital marketing.”

In layman’s terms, Google and Facebook can provide more leads, and for a lower cost per lead, than any other digital marketing channel, thanks to their data resources, economies of scale, and the number of visitors to their digital platforms.

But there are also signs of secret deals going on behind the scenes, as alleged by a lawsuit currently winding its way through the US courts. In 2017, Facebook began challenging Google for domination by entering the market for header bidding, a type of programmatic display ad. In 2018, that challenge ceased abruptly, allegedly in exchange for Google giving Facebook specific advantages in the former’s monthly auctions for publishers’ mobile app advertising inventory.

Challenges to the digital advertising duopoly

There were attempts to break the duopoly’s power, notably in 2017 when Disney floated TrueX, an ad tech provider, AT&T launched ad-buying unit Xandr, and Verizon invested in an ad-supported media arm. Although these have mostly fizzled out, true change might be arriving slowly.

Analysts are eagerly following ecommerce giants Amazon and AliBaba, which are slowly clawing back market share. The gap is still huge, but eMarketer points out that Amazon’s share of global digital ad revenues grew from 3.8% in 2019 to 5.2% in 2020, and forecasts it will rise again in 2021 to 5.8% and to 7.1% by the end of 2023. Combined with Alibaba’s 8.7%, this represents close to 15% of digital ad spend taken from the duopoly by the end of this year. Five years ago, Amazon held just 0.8%.

The Facebook-Apple feud may have an impact too. The newest versions of iOS require app developers to ask for express permission before tracking users across apps and websites, and this is widely seen as a direct challenge to Facebook’s revenues. But it’s not clear how this will play out. With few iOS users thus far permitting apps to track them, advertisers may simply switch to targeting Android users and avoid Apple’s platform.

In the end, like most empires, the duopoly’s own size could be what brings it down. The recent six-hour-long outage that closed down Facebook’s entire suite of tools caused as-yet-untold damage to the small businesses that rely on the network for marketing.

Business owners are taking note of the risk of depending on so few channels for customer acquisition and communication, and may soon seek to diversify. For example, Lucy Jeffrey uses Facebook to drive sales to her ethical clothing company Bare Kind. She saw sales fall by 25% during the outage. Facebook “is normally a very reliable tool and worth the money I spend on it,” she said, adding, “But now I’m reconsidering whether it’s wise to have all my eggs in one basket like this and be so reliant on one platform.”

Although that might only mean diversifying to Google ads, antitrust organizations and legal bodies around the world were reminded of the danger of allowing just two companies such a stranglehold on digital advertising.

The digital ad duopoly story is still being written

Thanks to their domination over the app store and almost legendary wealth of consumer data, Google and Facebook’s control over global digital advertising seems secure. But with ecommerce companies pushing back and grassroots resentment simmering over the lack of options, the day may arrive when the power balance shifts.