Google’s and Facebook’s dominance of online advertising and searches is laid out in the ACCC Digital Platforms Inquiry – Final Report issued on 26 July 2019.
These are key findings and commentary from the Report, with my analysis and illustrations from the Report of travel and leisure businesses which use social media extensively to attract searches for and advertise travel, flights, tours and accommodation.
Digital platforms provide a new advertising avenue
Google and Facebook operate multi-sided platforms. On one side, they offer services to consumers for a zero monetary price in order to obtain consumers’ attention and data, which they monetise. On the other side, they sell advertising opportunities to advertisers. Advertising is the source of most of the revenue earned by the two major digital platforms in Australia. (Report section 2 page 58)
Online advertising has helped businesses build a brand and following through social media. In particular, small businesses have benefited in advertising and reaching customers.
Customers already using Google Search for generalised search queries would be inclined to also use Google Search for specialised search queries, such as information on travel services, including flights, tours and accommodation, because users display customer inertia. The same cannot be said of users of specialised travel services, so this source of traffic is not available to suppliers of specialised travel search services. (Report section 2.3.1)
For these reasons, even when specialised search services have considerable reach, such as travel and hotel booking search services, Google’s general search service enjoys a competitive advantage over them. (Report section 8.4)
This explains both the necessity and the effectiveness of paid advertising on social media, particularly for specialised travel service providers.
Google and Facebook have substantial market power
- Google has substantial market power in supplying general search services in Australia. Google is likely to retain its dominant share of the market at least in the short- to medium-term.
- Facebook has substantial market power in supplying social media services in Australia, which are provided by its platforms, Facebook and Instagram. Facebook is expected to retain substantial market power in at least the short- to medium-term.
- Google has substantial market power in the supply of search advertising in Australia.
- Facebook has substantial market power in the supply of display advertising in Australia.(Report section 2 page 58)
Substantial market power has led to dominance in online advertising expenditure.
(Report page 18)
Travel agents and tour operators, hotels and resorts are hedging their bets by continuing to advertise in travel supplements in the 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 which attract travel searches and act as platforms for bookings.
Potential for anti-competitive conduct by expansion into related markets
Digital platforms with substantial market power have the ability and incentive to engage in leveraging behaviour which may affect competition in advertising and other markets. The risk of leveraging behaviour is increasing as Google and Facebook expand into other markets. (Report section 2 page 58)
Google and Facebook have a strong history of expanding into related markets. For example, Instagram’s recent entry into online shopping (whereby Instagram directly facilitates the purchase of certain brands), Facebook’s entry into jobs and dating services, and Google’s entry into flights and hotels. (Report section 3.3.1)
Google operates Google Flights, which provides users with the ability to search for flights, track flight prices and explore potential destinations, and shopping comparison service Google Shopping. (Report section 8.4)
The ACCC is signalling that it will be vigilant about anti-competitive conduct by Google and Facebook such as misuse of market power and in mergers and acquisitions.
Data collected is highly valuable
In addition to the amount of time spent on the platforms, the breadth and depth of the user data collected by each of Google and Facebook provides them with strong competitive advantages. The multiple touch points that Google and Facebook each have with their users enable them to collect user data, improve their services, attract more users and advertisers, thereby creating a feedback loop. No other businesses come close to the level of tracking undertaken by each of Google and Facebook. (Report section 2 page 58)
Why is Google’s data valuable? Search data, in general, is highly valuable as it provides very clear information about a customer’s desires. For example, a search for ‘Flights from Sydney to Japan’ reveals that the consumer is likely to be interested in flying from Sydney to Japan.
A user may visit a number of travel websites that advise on activities to do in Japan, and this data can be tracked by platforms such as Google. (Report section 2.5.2)
Personal information data collected from consumers is used by platforms to target advertising to consumers. Data privacy is a big issue.
Challenges and recommendations for reform for small businesses
The ACCC identifies challenges for small businesses who deal with Google and Facebook:
- Disputing decisions or seeking remedies
- Negative financial consequences if they are blocked from using the services
The recommendations made by the ACCC in the Report relevant to small businesses are:
- Establishing an independent ombudsman scheme 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 scam content
- Amending the Competition and Consumer Act 2010 so that unfair contract terms are prohibited and for civil pecuniary penalties to apply
- Strengthening privacy protections to effectively protect consumers’ personal information in light of the increasing volume and scope of data collection in the digital economy.
(Source ACCC letter to small businesses)
98% (by number) of businesses in the travel industry are small businesses. The ACCC recommendations will benefit them.
Paying the ferryman
Marketing Commentary by Michael Field, EvettField Partners www.evettfield.com
The Digital Platforms Inquiry – Final Report confirms what every small business owner and advertiser has known for years; that Google has substantial market power in supplying general search services and search advertising in Australia, and that Facebook has substantial market power in supplying social media services and of display advertising 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? Allow me to make some recommendations:
- Invest in a high quality, responsive and information-rich website
- Work with a qualified digital marketing agency to ensure you are keeping up to date with the ever-changing requirements of website design and navigation, SEO, keywords, user experience, page load times etc.
- Build your brand online by publishing regular, fresh, relevant and low/no-cost content that is both helpful and interesting for your customers such as educational videos, informational blogs, buying guides and cost calculators
- Develop effective data capture and CRM (customer relationship management tools) such as Hubspot, Salesforce email newsletters and membership or subscription-based services to help you stay directly in touch with your customers unmediated by the dominant platforms
- Build your brand offline through improved store presence, signage, fit-out, branded vehicles, uniforms, sponsorship etc.
- Blend old marketing strategies with new technology such as direct mailing prospective clients, video brochures etc.
- Stay deeply connected to your customers and their needs through ongoing market research, customer analysis and satisfaction measurement such as NPS (Net Promoter Score)
- Partner with a complementary business which services a similar market such as a veterinary practice partnering with local dog wash providers and conduct cooperative advertising campaigns and reciprocal links on websites etc.
- Develop strategic alliances and referral partners that are not dependent on digital platforms
- Build a strong social media presence and following on alternative platforms such as LinkedIn and Twitter depending on where your prospective customers congregate