Discover more from Madison and Wall
Media Industry Concentration and How To Analyze It
Alphabet, Meta, Amazon and Microsoft =55% of Global Advertising Ex-China (and Top 20 = 71%), But Key Issues And Growth Opportunities Require More Detailed Analysis
Over the course many years I’ve studied media industry concentration. Like many, I have concerns about whether or not the presence of a small number of information “gate-keepers” has negative consequences on society. In a professional context, for most of my career I have also been keenly focused on the implications of concentration for marketers and the competitive dynamics between media owners. This is because when I joined Interpublic’s Magna Global back in 2003, it was only two years after that entity was formed as the global advertising agency industry’s first consolidated negotiating unit. At the time, media owner concentration was a key rationale behind Magna’s creation as it was for the subsequent creation of WPP’s GroupM and other centralized media buying platforms at other agency holding companies.
Consequently, when I read about analyses or studies of industry concentration I’m particularly attuned to whether or not those studies accurately capture reality. It’s important because they lead to implications for analyzing the future growth opportunities for media companies and for assessing the choices (and prices) marketers will face. Towards these ends, I thought I should re-aggregate much of the source data for individual media owners in order to analyze relevant trends myself with relatively fresh eyes, which I reference throughout this post. While company-specific data comes from publicly reported figures for individual companies or my estimates of those figures, industry-level figures referenced below originate with GroupM via its This Year, Next Year data, which has a data-gathering process that produces numbers which are largely consistent with my analysis of individual company data.
Thanks for reading Madison and Wall! Subscribe for free to receive new posts and support my work.
The most critical observations include the following:
Share gains – and thus growth – for digital media platforms were relatively easy for many years, but they get harder going forward. Growth in the future will look increasingly like a zero-sum game where the gains for one company will mostly come at the expense of another. That could also be viewed positively, in that the media owners who invest most aggressively in their businesses – regardless of whether or not their histories are in television, digital, print or anything else - will be best positioned to grow the fastest.
US-based media owners have continued to take a significant share of the global industry in recent years, which reflect trends around digitization and globalization. US-based companies have capitalized on these trends better vs. companies based elsewhere, but nothing says they need to be the only ones to do so in the future.
When we assess concentration for purposes of understanding the competitive environment, it’s imperative to look at the data through the lens of different segments of advertisers. Paradoxically, while concentration has gone up substantially at the country and global levels, I argue that for like-for-like advertisers, concentration is either similar or possibly improved over a 20 year period of time. Globalization of competition paired with the emergence of new kinds of marketers who are pre-disposed to using the dominant global platforms explains the paradox.
Before we begin with the details, let’s start with some basic ideas which I think are important to consider when studying concentration within the advertising industry. In general, we should study data on a gross basis whenever possible, rather than on a net basis, as this better reflects control by media owners. This also means we need to be mindful of double-counting, which can be an issue when one media owner works closely with another. Second, I think that in general we should exclude ad revenues from China in our global analyses, as there are very few media owners who sell in China and vice versa. Bytedance’s TikTok is a clear exception, and of course I include them in all of the analysis which follows. Third, I think it’s critical to look at this data on a pro forma basis, capturing today’s largest sellers of advertising on a like-for-like basis over all periods of time where possible, as this provides a better sense of trajectory for the assets under the control of these companies.
For 2022, the top ten sellers of advertising excluding those which predominantly operate in China are Alphabet, Meta, Amazon, Microsoft, Comcast, Disney, Paramount, TikTok, Warner Bros. Discovery and Yahoo. They are followed by Fox, Snap, Z Holdings, Apple, RTL, I Heart Media, JC Decaux, Twitter, Pinterest, TelevisaUnivision and Mediaset to round out the top 20.
The top four accounted for approximately 55% of all global advertising revenue in 2022, up from 25% in 2016.
The top ten accounted for 65% of all advertising in 2022, up from 37% in 2016
The top twenty rose from 44% to 71% over the same period.
Regardless of how we look at the data, share gains were relatively pronounced until 2021, but then became very modest in 2022, with only a 1% change in concentration for either of the three groups.
The only non-American companies in the top 20 are TikTok, Z Holdings (formerly Yahoo Japan), RTL, JC Decaux and MediaForEurope (formerly Mediaset), although additional companies such as Pro7Sat1, ITV and Nippon TV are among the top 25.
The seven largest TV-centric media owners, which had approximately $65 billion in net ad revenue in 2022 saw only modestly higher revenues over the six years tracked here, and thus saw share fall from 15% to 10% over this period. Accounting for revenues these companies booked on behalf of other media companies would likely only have added another percentage point or two in each period.
The ten largest digital-centric media owners, which had $402 billion in ad revenue in 2022 grew share from 27% to 60% over the past six years.
If we go back further we can see more meaningful changes in terms of both the specific media owners who dominated and the shares they accounted for. Looking back to 2002 the top ten sellers of advertising globally in 2002 included Viacom, AOL Time Warner, GE, News Corp, Clear Channel, Bertelsmann (which previously owned all of RTL), Disney, Gannett, Tribune and Mediaset. This group combined to account for approximately 20% of all advertising outside of China vs 65% in 2022. Broadening to a list of the top 20 and the figure would be around 28% vs. 71% in 2022.
If we look at the US alone, concentration for the top 10 would have been slightly higher at 30% in 2002 and 63% in 2022. Interestingly, if we redefine media owners to include directories (i.e. Yellow Pages) and direct mail and treated all directory publishers as one media owner (appropriate, as Yellow Pages existed as monopolies or duopolies in each region at that time), in 2002 the top 10’s share of the industry would have been approximately 40%, which would compare to 62% on a comparable basis in 2022.
Observations on Growth Opportunities
One of the biggest issues that the data helps to illustrate relates to potential constraints on growth that the largest companies – primarily dependent on digital advertising – will have in the near-term if only because of their sheer size at the present time.
The biggest digital platforms captured relatively “easy money” from print for many years, and there’s not much left to grab. Looking at GroupM’s data, consider that newspapers and magazines accounted for 50% of global advertising in 2002 vs 6% in 2022 including their digital extensions (i.e. online advertising for which they collect revenue). If we included direct mail and directories, print probably fell from 57% to 8% over the same period. While much of the growth of digital advertising can be explained by the emergence of newer digital-first marketers, I would point out that if print-based media owners held their share of industry activity, they would have advertising revenues which are equivalent to 80% of the ad revenues generated by digital platforms. Print advertising was a primary source of growth for digital platforms for a few reasons:
Their offerings were much easier for some legacy advertisers to use (i.e. small businesses could buy on a self-service basis)
Digital platforms satisfied print-related goals better than print did for others (i.e. it was easier to reach niche or deeply engaged audiences, which previously a key reason for using magazines).
Print-based publishers were generally reluctant to invest sufficiently in their operations in order to better compete.
Looking forward, it’s certainly possible for digital platforms to continue growing faster than the overall advertising market because of the ongoing growth in newer marketers whose businesses are built around the digital economy. However, for the biggest players to grow faster, it will be necessary for these companies to invest more in their efforts to capture television budgets. We can see efforts of this nature from Alphabet (via YouTube), Amazon (via ad-supported sports on Prime Video and their FAST offerings) and Microsoft (via their relationship with Netflix for now), although arguably their impact is only modest at the present time.
Share changes are certainly possible within the largest group of sellers, but I believe growth will look increasingly like a zero-sum game where the gains for one company mostly come at the expense of another. That could also be viewed positively, in that I believe the media owners who invest most aggressively in their businesses – regardless of whether or not their histories are in television, digital, print or anything else - will be best-positioned to capture share within the industry. Whether or not doing so will be the most efficient use of capital for a given company will be a different question to consider.
Observations on Trends Related To US-Based vs. Non-US-Based Media Owners
The second big takeaway from the data to me relates to the expanding dominance of US-based media owners, most of which happen to be digitally-focused. I don’t think it was a given that this would occur. Back in 2002, Bertelsmann was a top-tier global player in media with a #6 position among global sellers of advertising. Italy-based Mediaset, with strong positions in its home market and in Spain was also in the top 10. Many others would have been close behind, such as Japan’s Nippon TV, France’s TF1 and JC Decaux, and ITV would have been in the top 20 as well. Further, Vivendi was seemingly poised to be a big player as well, even if their advertising business was small at the time.
However, at some point over the past decade, Alphabet and Meta became #1 or #2 in almost every country outside of China, with Amazon a strong #3 in many of them as well. Why did this happen? The growth of digital media, which coincided with the dominance of American companies in this space was clearly the driver, especially given a lack of meaningful competition originating outside of the US and relatively open international markets (at least outside of China). In the 2000s, efforts in Europe or Asia ex-China to build home-grown consumer-focused ad-supported digital platforms never really achieved critical scale at a regional or global level, with only a handful of scaled players whose operations were mostly limited to individual countries.
With few exceptions, most large media owners in individual markets failed to pursue global opportunities, and those with traditional media operations concurrently failed to invest sufficiently in the digital infrastructure which could have made it easier to capitalize on the overlapping trends of globalization and digitization. This is a key reason why I’m relatively optimistic about the capacity of US-based streaming services to take share of advertising markets outside of the US, and concurrently why I’m relatively negative about owners of legacy broadcast networks who are not doing the same.
Observations on Competition
One could review this data and come to the conclusion that the biggest platforms are simply too big. I think that’s an over-simplification.
Sure, Alphabet and Meta are around two thirds of US digital advertising and around 40% of all US advertising during 2022. Add in Amazon and Microsoft and we get to around 80% of all digital advertising and half of all advertising. This compares with figures from 2002 which would show that the four biggest sellers were only around 16% of all advertising excluding directories and direct mail (or 19% if we used a definition of media that included direct mail, with concentration going up because the USPS would have been the largest seller of advertising).
However, I argue that if we are looking at this for purposes of understanding “control” of the advertising industry, we need to look at this data from the vantage point of an individual advertiser.
If you transported yourself back to 2002 and put yourself in the shoes of a small business with, say, a $10,000 annual advertising budget, what were your choices? You would realistically have considered spending with your local (monopoly or duopoly) Yellow Pages company, the (monopoly) postal service for direct mail and maybe the local (typically monopoly) newspaper for an occasional print ad. In 2022 if you had a $10,000 (or even $20,000) advertising budget, you would realistically limit your choices to Google for paid search, properties owned by Meta for the customers you had first-party data on, and possibly Amazon if you were focused on e-commerce. It’s still only a handful of choices, but the difference now is that it’s the same three choices for every small advertiser regardless of where they are located in much of the world.
While we can argue that three options are too limiting in either era, at least today’s options are superior because they each operate globally and thus are better aligned with the opportunities that most companies have in front of them. In the past, expanding advertising operations to include other territories would have included working with additional geographically constrained media owners who would have been similarly non-competitive. In the present era, a marketer knows that they’ll be able to apply their skills and knowledge from one market to another.
For larger advertisers, the world similarly hasn’t changed very much. Back in 2002 a typical large brand would have allocated the vast majority of their advertising budget to national TV, primarily to networks owned by the four largest broadcasters whose properties probably accounted for two-thirds of national TV advertising. AOL Time Warner would have also captured a sizeable share of national TV along with a large share of print and digital budgets, while Hearst and Conde Nast would have also been very important for many. Yahoo and Microsoft, while still growing, would have been much smaller partners for typical large advertisers at the time. All in I would guess that for the typical large advertiser, no one media owner would have accounted for more than 25% of an advertising budget with the top 10 accounting for perhaps 80-90% of the total.
Looking at how those budgets get divided up today, Google and Facebook are certainly the largest partners for individual marketers, but similarly there are probably very few large brands who spend more than 25% of their budgets with either of them, and fewer who spend half with the two. The typical large brand allocates around half or slightly more of their budget to all digital advertising, and this money is divided up between Google, Facebook and Amazon to be sure, but also with TikTok, Snap and Pinterest who each account for meaningful shares. Depending on the advertiser, Microsoft or Yahoo will be a sizable part of a budget (and prior to Elon Musk’s takeover of Twitter, that company would have been among this group, too). Retail media via Walmart, Instacart, Target and others is significant for many packaged goods companies, and niche digital publications or B2B properties will be important for others. Meanwhile, the TV budget is now divided up primarily among five sizeable players. For most large advertisers, anything outside of digital or television is relatively minor by comparison. Consequently, I think that a typical marketer probably continues to allocate around 80-90% of their budgets to around 10 media owners, and possibly more.
Outside of the US, I would argue that competition has more likely improved for most large marketers: in most European markets, only two sales houses controlled by dominant network owners typically account for the bulk of TV advertising whether in 2002 or 2022, and only a handful of media owners would have accounted for the bulk of the remainder of advertising in 2002. However, in the present era large marketers have the same range of choices among the global media platforms that exists in the United States, significantly broadening the range of potential suppliers of advertising inventory vs. what we would have seen in prior decades.
None of this is to say that enforcers of anti-trust laws should not remain vigilant in trying to ensure that markets remain competitive, and similarly it is not to disregard that there can be negative consequences to societies from too much media concentration. However, I think that where assessments are made, they should occur at the level of different marketer segments, as this can help to better illustrate the underlying trends and whether or not existing levels of concentration create problems or instead help to solve them.
Thanks for reading Madison and Wall! Subscribe for free to receive new posts and support my work.