In ad tech, there’s Facebook and Google, and then there’s everyone else.
In the first quarter of 2016, revenue rose 21 percent year over year, according to the Interactive Advertising Bureau—but 90 percent of that growth went to Facebook and Google. It’s no wonder that industry experts like Jason Kint, chief executive of Digital Content Next, refer to the pair as a duopoly.
There are serious consequences for the many ad tech players jostling for that meager 10 percent of the pie. Ad tech funding is dropping rapidly, according to the Financial Times, and investors see dim futures for ad tech companies who can’t compete with Google or Facebook.
Could the same thing happen to the martech industry?
While established players like Adobe, Salesforce, and Marketo are rarely mentioned in the same breath as tech’s “Frightful Five“—Facebook, Google, Amazon, Apple, and Microsoft—there is increasing evidence that the tech giants are eyeing martech. And they’re bringing superior talent, vertical advantages, and astronomical budgets with them.
‘If they aren’t worried, they aren’t paying attention’
One of the core advantages Facebook and Google have over ad tech competitors is control at scale.
Facebook, for example, completely commands its advertising platform, the News Feed: It owns all the data, the ad experience, and its untouchable social graph of 1.7 billion people (not to mention Instagram and WhatsApp). Ad tech platforms, on the other hand, operate across the web, where bots, adblocking, and disjointed software integration run rampant.
While martech platforms are less dependent on the open web, the competitive advantage provided by huge walled gardens cannot be understated. In a world ruled by the customer, as analyst Ben Thompson argues, walled gardens hold immense power.
Since Facebook and other platforms like Amazon control the customer experience, customers and suppliers have to rely on them. The tech giants serve as middlemen, and without them, neither side could get what they wanted. What does this mean for martech? If customers continue to consolidate their behaviors on platforms owned by these tech giants, martech companies will be more dependent on them to reach customers.
“The marketing technology battle of the next five years will not be Adobe versus Oracle versus Salesforce, so much as all of those martech vendors versus Amazon, Facebook, and Google.”
Look at it this way: E-commerce companies need to be on Amazon. And since Amazon controls the customer experience and data, it holds all the leverage. Martech platforms can only integrate and provide solutions to businesses if Amazon allows it.
That dynamic is already widespread on Google. Because of Google’s monopolistic control over the search engine space, SEO and martech tools are beholden to Google’s whims. Ultimately, Google controls the flow of data. If it wanted to cut off a company like Moz and build its own tool, it could.
Scott Brinker, editor of ChiefMarTech, calls this vertical competition. “If [martech firms] aren’t worried, they aren’t paying attention,” Brinker told me in an email interview. “The marketing technology battle of the next five years will not be Adobe versus Oracle versus Salesforce, so much as all of those martech vendors versus Amazon, Facebook, and Google.”
The push into martech has already begun. Amazon offers a marketing stack under the Alexa banner, while Amazon Web Services dominates cloud-computing. Plenty of marketers already use Google’s Analytics suite, and its cloud-based productivity software with G Suite is gaining traction. And it’s safe to say they aren’t stopping there.
According to Brinker, there’s an even bigger disruptive force coming from tech giants: new client interfaces like Amazon’s Alexa, Google’s Google Home, VR and AR, and the Internet of Things (IoT).
“If people use Amazon Echo to answer common questions that they used to search for on Google, that is a powerful piece of the ‘channel’ now controlled by Amazon,” Brinker writes. “The same applies to Apple’s Siri. Or Facebook’s Messenger bot.”
Voice-enabled computing and other new client interface technologies could disrupt the entire customer journey. Rather than visit a homepage or a company Facebook page, potential customers could simply tell their Alexa devices to buy a product. Amazon becomes the only player in that experience, leaving martech vendors on the outside looking in. Eventually, marketers may have to use software provided by these major platforms just to survive.
“The more that marketers are able to directly use these internet services to reach and engage their audience, the less time and money they will invest in other channels and activities,” Brinker said.
Don’t expect ad tech or martech to collapse entirely. Tools will always have value for specialized marketing functions, and it’s not a given that Facebook, Google, and Amazon will continue to consolidate their control of the customer experience. But as customer data and the customer experience grow in importance for digital marketers, it’s imperative that martech firms pay close attention to the companies ultimately in control of both.