Adtech Mergers and the Duopoly


And where that leaves the rest of us

A couple of weeks ago, two of the most important players in modern digital advertising announced that they would be merging. No, you didn’t sleep through the announcement of Google and Facebook’s merger! It’s Taboola and Outbrain that will be merging to form what will likely be one of the largest digital advertising companies outside of the duopoly of Facebook and Google. 

And that’s the exact reason for this merger. By jumping on top of one another, two of the largest midgets outside the so-called Walled Gardens hope to be able to scale the wall. Together, goes the line of thought, they’ll be able to challenge the duopoly better. 

But why now? Why would two companies that have managed to grow to hundreds of millions in revenue and, together, dominate much of the native advertising world, decide that now is the time to merge. 

So let’s look at what might be driving this decision.

First some background

To understand the reasoning behind this merger, we need to look at the industry as a whole, its health, its history, and where it seems to be heading. 

The Duopoly holds

Online digital advertising is, as it has been for some time, a fief divided between two kings. The first of these two co-regents is Google (or, rather, Alphabet). Google’s empire was built on, and to a large extent is still built on, its search engine. 

Google’s dominance in this domain remains almost total in much of the developed and developing world. Its reign, however, has not been uncontested. At the foot of this so-called Walled Garden lie a large number of startups and multinationals that all sought to build the fabled “Google killer” to no avail. 

Google’s seemingly unassailable fortress is founded on not just search, but also on the intelligent acquisition of YouTube in 2005 that allowed them to gain a considerable headstart in online video. A headstart that has only grown since the acquisition. 

Facebook’s giant share of the digital marketing industry is mostly a function of its almost ubiquitous social network. Even as it’s social network has begun to lose users, and as its userbase has started to age, intelligent acquisitions have only further anchored its place on the throne. First, there was Instagram, then later WhatsApp. Facebook has proven itself ready and willing to invest large sums of money intelligently in order to secure its spot at the top of this industry.

So, his duopoly has proven durable, and there is little sign that outsiders will be able to break the duopoly in the near future. The only real, threatening challenger on the market is Amazon. Like Google and Facebook, Amazon has an enormous treasure trove of information on a truly vast number of users. And, like Google and Facebook, it is one of the very few online services that the majority of (western) netizens use consistently. 

So even if Amazon secures its own part of the fief (something that is far from certain), it will only make those outside these three Walled Gardens ever more crowded

It’s an industry used to growth

The digital advertising industry has been enjoying a long, long honeymoon period. The sector often experienced double-digit growth for years at a time and showed incredible resilience in the face of an economic downturn. Even in 2008, the industry not only survived but grew. 

This is largely because it has profited from successive digital revolutions and had a very, very large traditional advertising industry to cannibalize. 

Initially, the industry grew with the advent of online publications and the development of display advertising. This began and continues to eat away at traditional print media and, subsequently, traditional print advertising. 

However, then came the as of yet unfinished digital video revolution. With YouTube’s explosive growth and massive success with user-generated content and Netflix and Amazon’s breaking disruption of traditional long-form video distribution, digital advertising was boosted by a second revolution before the first was even complete

Shortly after video’s digital transition began, the mobile transition began. Of all the waves that lifted the digital advertising boat, the mobile transition was the biggest and most important. 

Kicked off by the unveiling of the iPhone in 2008, the introduction of the first popular smartphone gave advertisers a chance to advertise to everyone – no matter where they were. With smartphones, users had access to text and video content anytime, anywhere. 

As the technology became cheaper and as the functionality increased with the non-stop development of “apps,” smartphones quickly went from status symbol to must-have. 

Users began spending more and more time on their phones using various applications and playing various games, and a vibrant advertising industry sprang up to serve these users ads. 

The importance of this cannot be overstated. As users spend hours and hours per day on their phones and increasingly little time browsing on their desktops, mobile advertising has come to form the lion’s share of modern digital advertising expenditure. 

This trend will likely only continue as the developing world is even more mobile-focused than the western world. And this is one of the few areas where high growth potential can still be found. 

But in the developed world, smartphone ownership has reached saturation, and it looks like time spent on the phone won’t be going up much more. People already spend so much time on their phones, and there are only so many hours in a day!

Read more about the changes to come in the digital advertising industry and where growth can still be found

But there hasn’t been another significant revolution over the last few years. And, more importantly, digital advertising has already become the majority of advertising spend in most major, developed western markets. In some cases, like in the UK, for example, digital advertising is almost three-quarters of total ad spend.

This means that there isn’t so much traditional advertising market left to be cannibalized. Since digital advertising has been taking ad spend from traditional advertising vectors for some time, what’s left of print, TV, and radio advertising are the areas where they truly excel. And that’s where the so-called moat is the widest. 

These are things like live sports on television. For example, so far, there hasn’t been a real digital disruption of the live sports industry. This is because the entire industry and the apparatus for broadcasting live sports are built around traditional broadcast TV.  

So not only is there less and less ad spend to be cannibalized from traditional sources, it will be increasingly difficult to get advertisers to abandon them. 

These are just some of the reasons that projections for digital advertising growth in the West are declining sharply. 

Slowing growth thins the herd

As growth slows, Adtech companies are going to have to fight over the same pieces of the pie. When there was double-digit growth year-over-year, and when there was still a vast traditional advertising sector to be cannibalized, there was a lot of breathing room for Adtech companies. Yes, they were competing with one another, and yes, they all existed in the shadow of the Walled Gardens, but since the industry was expanding so fast, there was room for a lot of little players

As that expansion comes to an end and as the Walled Gardens show no sign of falling, Adtech companies are only going to be able to grow at the detriment of other Adtech companies

This is going to put pressure on them to innovate, to specialize, and to merge

The developing world can only help so much

In an attempt to maintain the growth rate to which adtech companies have become accustomed over the last decade and a half, they are increasingly looking toward the developing world

And there is, indeed, a lot of opportunities here. However, this is not the Shangri La that many in the industry are making it out to be, and the reasons for this are quite simple. 

Constraints on growth aren’t only found in the developed world. In the developed world, there is a significantly different dynamic at play that limits growth potential. And that is that the users are not very high-priority because they simply don’t have much disposable income. Without a lot of disposable income, advertisers have little reason to focus on them. 

This means that advertising growth in the developing world will grow as a function of the overall increase in wealth and wages. But economic growth in the developing world is sporadic, unpredictable, and rarely enters the double digits. 

So, while there is a lot of potential for growth here, the consistent, double-digit, long-term growth that Adtech companies have enjoyed by eating traditional advertising’s lunch and cashing in on a series of revolutions… is simply not going to happen here.

So the industry must adjust to slower growth

This slowing growth in the West and the lack of significant growth opportunities elsewhere is going to force companies to innovate and streamline. And that’s precisely what Outbrain and Taboola are doing.

The merger is not indicative of the duopoly finally falling. Instead, it indicates that both companies understand that to thrive (or perhaps even just to survive) in the near term, the best thing to be is a big fish in a small pond. Rather than fighting each other, by merging they put themselves in the best position to stake out their position as industry growth slowly winds down. 

Together, they form a behemoth in native advertising that will be extremely hard to dislodge. 

With Amazon’s entry into the market and with the merger of Outbrain and Taboola, I fully expect the following:

One, I think there will be a substantial thinning of the herd. A lot of players in this industry add very little, if any, value. They just wanted to hop into a hot market and pull out as much money as possible while the getting was good. 

That’s not practical now. 

As the industry matures and growth slows, only those that add value are going to be able to survive. 

The other major trend that this slowing growth is going to elicit is consolidation – precisely what we see with Outbrain and Taboola. As growth slows and as players entrench themselves in their niche, adding value might not be enough in some cases

Taboola and Outbrain, for example, both decided that their future would be significantly better and more secure together. 

I expect that in the coming months and years other companies are going to jump on the same boat and look at how they will have to position themselves to succeed and, in some cases, just to survive.


Digital advertising has enjoyed an extremely long period of break-neck growth. But all indications are that this is coming to an end. That doesn’t mean that the party is over, just that growth will fall to a level that would be considered healthy in any other industry

In the advertising industry, which has become accustomed to double-digit growth for over a decade, this can seem apocalyptic and will undoubtedly result in restructuring. 

However, it will also drive innovation. And for those businesses that are willing to take up the challenge and innovate, the coming market conditions will provide plenty of opportunities.

Mobinner is a High-Performance Demand-Side Platform. Since 2017, Mobinner has been helping clients build brands, drive conversions, and acquire users. See what Mobinner can do for your business today!

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