Business Environment

The Market Power of Facebook and Google

15 August, 2019, Posted By Townsville Chamber

The Australian Competition and Consumer Commission has released its final report for the inquiry into Digital Platforms, examining the impact of online search engines, social media and digital content aggregators in the business environment.

The report provides an insight to the impacts of digital platforms on three focus user groups – advertisers, media content creators and consumers – making 23 recommendations covering competition law, consumer protection, media regulation and privacy law and the education of digital media literacy within the community and in schools.

 

TheĀ  Market Power of Facebook and Google

The report identified the significant adverse effects associated with the rise of digital platforms in Australia; one of which being the hold of significant market power of Facebook and Google.

The ACCC investigated positions of market power of major social media platforms within Australia, finding that Google (19.2 million monthly users in Australia) and Facebook (17.3 million monthly users in Australia) are the most dominant of the digital platforms. More and more Australian’s are spending increasing amounts of time on these platforms and as a result, they occupy a key position for businesses looking to expand their reach to consumers.

 

Advertising and Data Collection

Facebook and Google have the ability to collect consumer data for the purpose of selecting the type of content and the prominence of the content that is displayed to users. Such powers of the digital platforms are outlined in their terms and conditions and these are used to sell digital advertising spaces and opportunities to businesses.

As it is, approximately 95 per cent of general searches in Australia are performed through Google Search and the company earns almost 96 per cent of the advertising revenue in Australia. Facebook on the other hand, combined with Instagram, have approximately 51 per cent combined share in the Australian online display advertising market.

 

An Unfair Advantage?

The dominance of Facebook and Google have distorted the advertising and media markets and the potential for competition based on their merits and value for money. The ability for large and dominant firms such as these to acquire potential competitors contributes to their substantial market power. Further, the advertising and media services offered by the firms raise questions about the lack of transparency and risk of anti-competitive conduct.

According to the ACCC, the lack of transparency in terms of the advertising processes of dominant platforms such as Facebook and Google makes it difficult for advertisers to understand the way in which their advertisements are being promoted and positioned to consumers.

There is also space for anti-competitive conduct due to the power of the two to self-preference and gain influential insights and data to assist them with entry into related markets. This data and insight would not otherwise be available to advertisers and other smaller competitors.

In the report, the ACCC recommends greater monitoring, investigation and enforcement of issues in markets and inquiry into the supply of ad tech services and advertising agencies.

To read more about the adverse effects associated with the rise of digital platforms, click here.

 

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