A report released by the US-based Internet Advertising Bureau or IAB last week said that, "Internet advertising revenue rose 17 per cent to a record $42.8 billion in 2013. TV ad revenue, in comparison, was $40.1 billion in 2013." Almost every digital evangelist gleefully picked on the number. The usual stories about the net beating other media started doing the rounds. But there was a small problem - the IAB numbers are incomplete. Its statement categorically talks of "broadcast television". This is only terrestrial television in the US. It does not include advertising on cable TV and on satellite TV (which we know as DTH in India). Put it all together and the total ad spend on television in the US in 2013 was more than $76 billion, way over what was spent on the internet.
More importantly, this $76 billion is split among at least a dozen reasonably large companies, which are not allowed to become monopolies thanks to a strong regulator. That and the competitive pressure - from each other and from other media such as online - keeps American TV firms such as Turner, Disney or Fox on their toes. They compete hard, make good programming and also money. But there is no way any of them will be allowed to own a dominating share of audiences and revenues.
That, however, is happening very fast in the internet space. According to data from eMarketer, the $55-billion Google gets over 41 per cent of all advertising revenues spent on online in the US in 2013. The second highest is Yahoo! with a 7.7 per cent share. Amazon has a 20 per cent share of all online spends in the US. Similarly, Apple has a dominating 46 per cent share of the US smartphone market and a similar dominance in online music sales, among the dozens of other products that it sells around online media consumption.
Between them, Google, Amazon and Apple largely dominate most local markets they enter - with the exception of China. Globally, the internet is touted as a beacon of hope, democratisation and freedom but structurally it is beholden to the will of these three large corporations.
Note - there is nothing wrong or evil about their dominance, this is just the way the market has developed.
This dominance is built on content from firms that spend billions of dollars creating it. This content is then aggregated by Google (among dozens of others), which makes advertising money that is a fraction of what a 30-second spot would sell for on TV. About 10 to 30 per cent of this revenue is then split with the content creators. In conversations across film, TV, music or other content firms, the big issue is share of revenues. Then there is the cost of infrastructure - the broadband pipes and spectrum, the hardware and the software needed to feed the growing demand for online content.
But this is not just about Google or Amazon. It is about getting some perspective to the celebrations around the growth of digital.
Last year, when I tweeted something about Google's India revenues (half of all internet ad spend in India), there were delighted tweets from people across the media spectrum. When are Google's revenues going to overtake Star India or The Times of India (TOI), asked one senior media manager? They will, in another three years perhaps. But the two questions to ask are these. One, where is this growth going? Is it going to the same set of companies or are new firms coming up?
Two, as advertisers, media buyers or as audiences, would you want to be in a market where there are just two to three choices of media? Because it doesn't matter how many small independents come up to serve you quirky video films, they will not make money.
Media planners don't like dominating brands such as Star or TOI because they get very little room to negotiate. But the fact is that Star or TOI or any of the other big media brands operate in a highly competitive environment and hold onto their own. Star has five other networks constantly nipping at its heels and TOI has a dozen newspaper groups giving it a hard time across different markets in India.
Imagine the arm-twisting on ad rates that a company with the bulk of traffic and over half of all the advertising revenues online, is capable of.
Their dominance means that only Google, Amazon or Apple will have money to invest in the business. Sure, Facebook or WhatsApp, have gained traction but without commensurate revenue dominance. The only serious competitor to Google and Apple so far has been Amazon. It succeeded with the Kindle and launched Fire TV, a set-top-box last week.
However, so far, the online media market still remains oligopolistic at best. That is dangerous in any media market - especially one with possibilities as rich as those of the internet.
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