The dominance of Google and Facebook in online advertising and search is described in the ACCC Digital Platforms Survey – Final Report released on July 26, 2019.
These are the key findings and comments from the report, along with my analysis and report illustrations of travel and leisure companies that heavily use social media to attract searches and advertise trips, flights, tours, and accommodations.
Digital platforms offer a new advertising avenue
Google and Facebook operate multi-sided platforms. On the one hand, they offer services to consumers at zero monetary cost in order to gain consumer attention and data, which they monetize. On the other side, they sell advertising opportunities to advertisers. Advertising is the source of most of the revenue generated by the two major digital platforms in Australia. (Reporting chapter 2 page 58)
Online advertising has helped businesses build a brand and follow them through social media. In particular, small businesses have benefited from advertising and reaching customers.
Customers who already use Google search for generalized search queries would be inclined to also use Google search for specialized search queries, such as information on travel services, including flights, tours, and accommodation. , because users display customer inertia. The same cannot be said for users of specialty travel services, so this source of traffic is not available to providers of specialty travel search services. (Reporting article 2.3.1)
For these reasons, even when specialist search services have a huge reach, such as travel and hotel booking search services, Google’s general search service enjoys a competitive advantage over them. (Reporting article 8.4)
This explains both the need for and the effectiveness of paid social media advertising, especially for specialist travel providers.
Google and Facebook have substantial market power
- Google has substantial market power providing general research services in Australia. Google is likely to maintain its dominant share of the market at least in the short to medium term.
- Facebook has substantial market power providing social media services in Australia, which are provided by its platforms, Facebook and Instagram. Facebook is expected to retain substantial market power at least in the short to medium term.
- Google has substantial market power in the provision of advertising research in Australia.
- Facebook has substantial market power in the provision of advertisment display in Australia. (Report section 2 page 58)
Substantial market power has led to the dominance of online ad spending.
(Reporting page 18)
Travel agents and tour operators, hotels and resorts are hedging their bets by continuing to advertise travel supplements in print media and in brochures.
Online there are many powerful accommodation websites such as booking.com, airbnb.com, tripadvisor.com, hotels.com, expedia.com and trivago.com that attract travel searches and serve as booking platforms. .
Potential for anti-competitive behavior through expansion into related markets
Digital platforms with substantial market power have the ability and incentive to engage in behavior that can affect competition in advertising and other markets. The risk of taking advantage of the behavior increases as Google and Facebook expand into other markets. (Reporting chapter 2 page 58)
Google and Facebook have a long history of expanding into related markets. For example, Instagram’s recent entry into online shopping (where Instagram directly facilitates the purchase of certain brands), Facebook’s entry into jobs and dating services, and Google’s entry into flights and hotels. (Reporting article 3.3.1)
Google operates Google Flights, which offers users the ability to search for flights, track flight prices, and explore potential destinations, as well as the Google Shopping shopping comparison service. (Reporting article 8.4)
The ACCC advises that it will be vigilant in the face of anti-competitive behavior by Google and Facebook, such as abuse of market power and mergers and acquisitions.
The data collected is very valuable
In addition to the time spent on the platforms, the breadth and depth of user data collected by Google and Facebook gives them strong competitive advantages. The multiple touchpoints that Google and Facebook each have with their users allow them to collect user data, improve their services, attract more users and advertisers, thus creating a feedback loop. . No other company comes close to the level of tracking undertaken by Google and Facebook. (Reporting chapter 2 page 58)
Why is Google data valuable? Research data, in general, is very valuable because it provides very clear information about a customer’s desires. For example, a search on “Flights from Sydney to Japan” reveals that the consumer is likely to be interested in a flight from Sydney to Japan.
A user can visit a number of travel websites that advise on what to do in Japan, and this data can be tracked by platforms such as Google. (Reporting paragraph 2.5.2)
Personal data collected from consumers is used by the platforms to target advertising to consumers. Data privacy is a big issue.
Reform challenges and recommendations for small businesses
ACCC identifies challenges for small businesses dealing with Google and Facebook:
- Contestation of decisions or appeals
- Negative financial consequences if they are blocked in using the services
- Conditions of use and confidentiality of unfair contracts
The recommendations made by ACCC in the small business report are as follows:
- Establish an independent ombudsman system to resolve complaints and disputes between businesses and digital platforms, including those relating to the purchase or performance of advertising services, and the removal of fraudulent content
- Modify the Competition and Consumer Law 2010 so that abusive clauses are prohibited and that civil pecuniary penalties apply
- Strengthen privacy protections to effectively protect consumers’ personal information in light of the increasing volume and extent of data collection in the digital economy.
(Source ACCC letter to small businesses)
98% (by number) of companies in the travel industry are small businesses. ACCC’s recommendations will benefit them.
Pay the smuggler
Marketing commentary from Michael Field, EvettField Partners www.evetfield.com
The Digital Platforms Survey – Final Report confirms what every small business owner and advertiser has known for years; that google has substantial market power providing general research services and advertising research in Australia, and that Facebook has substantial market power providing social media services and of advertisment display in Australia; and that it is unlikely to change in the short to medium term.
So what can a small business owner or advertiser do to make their brand and market presence stand out in a highly concentrated and heavily dominated digital marketing landscape? Let me make some recommendations:
- Invest in a high-quality, responsive, and information-rich website
- Work with a skilled digital marketing agency to ensure you stay up to date with the ever-changing demands of website design and navigation, SEO, keywords, user experience, load times pages, etc.
- Grow your brand online by posting regular, fresh, relevant, and inexpensive content that is both useful and interesting to your customers, such as educational videos, informational blogs, buying guides, and cost calculators.
- Develop effective data capture and CRM (customer relationship management tools) like Hubspot, Salesforce email newsletters, and membership or subscription based services to help you stay in direct contact with your customers without mediation by dominant platforms
- Grow your brand offline with better in-store presence, signage, layout, branded vehicles, uniforms, sponsorship, and more.
- Mix old marketing strategies with newer technologies like direct mail to leads, video brochures, etc.
- Stay deeply connected to your customers and their needs through ongoing market research, customer analytics, and satisfaction metrics such as Net Promoter Score (NPS)
- Partner with a complementary business that serves a similar market, such as a veterinary practice in partnership with local dog washing suppliers, and run cooperative advertising campaigns and reciprocal website links, etc.
- Develop strategic alliances and reference partners who do not depend on digital platforms
- Build a strong social media presence and follow alternative platforms like LinkedIn and Twitter depending on where your potential customers congregate