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Twitter Evidence Confirms Goobook Ad Cartel Is Crushing Competition

Summary: The de facto Goobook ad cartel is quickly crushing its only current online social advertising platform competitor, Twitter. Twitter’s failing business is the proverbial canary in the coal mine that should bring attention to the imminent danger of this apparent cartel to the future commercial viability of the broader online content marketplace.

Practically it means U.S. antitrust authorities’ lax antitrust enforcement has facilitated the emergence of twin colluding monopolies in search and social advertising. The result is a de facto and unaccountable new media cartel, the 21st century Google/Facebook Fourth Estate, that is anti-competitively destroying and supplanting the original, old media, Fourth Estate, and that is the central facilitator of algorithmic-automated “fake news.”      

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The evidence is piling up that Alphabet-Google and Facebook’s apparent collusion in 2014 -- to abruptly stop competing directly in search and social advertising, in order to divide up the online ad market to entrench and maximize their respective search and social ad monopolies -- is seriously harming competition.

Twitter, as the only significant, independent, social advertising platform competitor, is the proverbial canary in the coal mine of nontransparent, unaccountable, winner-take-all, netopoly ad platforms.

As recently as mid-2016, Twitter was one of the few public companies growing revenues at a fast 20% annual rate and was shopping itself to potential buyers, but in October, no one made a bid to buy Twitter.

Last week, Twitter’s 4Q16 earnings showed Twitter’s annual advertising revenue was no longer growing and slightly contracting; and guidance was discouragingly more of the same.

(For perspective, Google’s $90b in annual revenues is 36x larger than Twitter’s $2.5b annual revenue and is growing annually at 20+% or +$16b in 2016; and Facebook’s $27.6b is 11x larger than Twitter’s and growing at 50% or +$13b in 2016.)

Simply, Twitter as a social ad platform competitor to Google/Facebook is getting crushed.

In the last three months, Twitter, widely-recognized as the best site in the world for real-time content, went from the eighth-most-visited Internet site in the world to the sixteenth per Alexa.

Could this precipitous drop in Internet visits be at least partially a result of the Alexa #1, #2 and # 3 most-visited sites in the world, Google, Google-YouTube and Facebook, diverting traffic from Twitter to Google via: Google Search, News rankings, and the Accelerated Mobile Pages Project; and from Twitter to Facebook via: Facebook, Instagram (Stories) , Messenger, WhatsApp and Facebook Instant Articles?  

This precipitous drop in revenue growth and traffic is remarkable given the broader context with which everyone is acutely aware.

During the last year, Twitter has been the virtual epicenter of most U.S. election and Presidential transition breaking news -- for obvious reasons.

Undoubtedly, as an advertising-based, platform, brand and app, Twitter’s influence, impact and power has increased as result of being the leading medium for breaking news during this exceptionally news-intensive period.

If the world’s best site for real-time content, can’t grow or profit from an obvious huge increase in macro demand for, and eyeball-attention to, their real-time content and ad platform – something appears seriously awry.

Competitive markets driven by supply and demand don’t behave this way.

Is what’s suddenly seriously wrong with Twitter’s business, all Twitter’s fault, or is Twitter being crushed anti-competitively by the Goobook ad cartel that increasingly dominates the flow of most Internet traffic and its ultimate monetization?

The most telling evidence that the Goobook ad cartel is crushing competition from Twitter, may be this damning Statista chart, from Business Insider, that charts that Twitter’s revenue growth rate peaked in mid-2014, exactly when it appears Google and Facebook decided to stop competing directly with each other, and when their rate of collusive cartel dominance of new online ad growthaccelerated.

It is unlikely that perfect timing is coincidental.

Another piece of telling evidence is another Statista chart entitled “Competitors leave Twitter in the dust” which really is all about Facebook (and its three other, Facebook-owned, social ad-based services: Messenger, WhatsApp and Instagram) leaving Twitter in the dust.

Over the last two years since Google+ and Google Orkut stopped competing with Facebook in social, apparently in return for Facebook agreeing to stop competing against Google in search, Twitter added only 31m monthly active users, when Facebook added +467m, Messenger +500m, WhatsApp +500m, and Instagram +300m users.

(Bonus-Note on Snap: In the above chart, Snap, which Facebook tried to buy in 2013 for $3B, also outpaced Twitter’s +31m user growth, with +87m new monthly active users, but badly lagged Facebook-Instagram’s 3.5 times faster user growth of +300m.

Despite the current perceived optimism about Snap’s pending high-profile IPO, competitively, Facebook-Instagram and Google-Photos/Android are on path to make Snap effectively superfluous long term.

Simply, Facebook and Google long term can do most all that Snap can, better and for more users, advertisers, developers, far more efficiently and far more profitably. Snap is a rare trendy IPO in an IPO-starved market. It is not a legitimate potential social advertising platform competitor to Facebook and Google.

Google also has ensured Snap would be a de facto Google colony. Snap has effectively outsourced most of its key infrastructure and core operations and scaling to Google since 2011. In November, Alphabet-Google became a quiet private investor in Snap. On January 30th, Snap signed a $2b, five-year cloud-computing deal with Google that makes Snap highly-dependent on Google for its success, and effectively gives Google an especially intimate inside perspective on most everything Snap is doing business and innovation-wise, and where it is going, commercially.

It is telling that Google reportedly was in discussions about providing Snap video and image search capabilities, but that deal did not materialize, probably because of potential unwanted antitrust attention.

The biggest red flag of Snap’s IPO is that Snap mercurially changed its purpose, identity, and business from a currently fast-growing, ad-funded, video sharing app, to “a camera company” with less growth and scale potential, just before announcing its IPO that is supposedly based on the future-viral-growth expectations of a popular video sharing app. Start head scratching now.

Bottom-line: Both Google and Facebook already have ensured that the nascent Snap platform is no serious competitive threat to either of them.)          

In sum, the de facto Goobook ad cartel is quickly crushing its only current online social advertising platform competitor, Twitter. So much so, that Twitter may not be able to survive long term as an independent company.

And the next potential competitive social ad platform in the queue, Snap, apparently has been neutralized as a competitive threat as well, by Google and Facebook.

What does this mean in the big picture?

It means lax U.S. FTC/DOJ antitrust enforcement has:

1) Facilitated maximal new media platform concentration via acquisition, i.e. twin new media platform monopolies in search (Google) and social media (Facebook) advertising resulting in ~90% respective market shares;

2) Ignored these twin Google and Facebook new media monopolies’ apparent collusion to divide up and corner their respective online advertising markets;

3) Ignored that Congress long considered competition in U.S. media markets especially important to democracy in creating media ownership limits, in addition to antitrust enforcement;

4) Enabled a de facto new media Google-Facebook Fourth Estate to emerge, that is more than half-way through, anti-competitively destroying the original Fourth Estate, by predatorily disintermediating old media suppliers from their readers, viewers, and advertisers; forcing a predatory wholesale price of zero for proprietary content to be monetized online globally; and devaluing copyright-licensed and contractual content predatorily, via hostility to intellectual property and its protection from piracy; and  

5) Spawned, promoted, and profited from, “fake news,” aka: algorithmic/automated news collection, ranking, distribution and monetization by Google and Facebook, with minimal, competitive accountability, corporate responsibility, transparency, human judgement, curation, editing, or oversight. 

How much worse must this cartel’s impact get on the economic viability and solvency of old media companies and the journalism business model before the disintermediated Fourth Estate goes forth and states the obvious to antitrust authorities, Congress and the public?

Time will tell if the Alphabet-Google/Facebook online advertising cartel is already too politically, economically, and commercially powerful for the U.S. Government to investigate, let alone prosecute.

Forewarned is forearmed.  

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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and before the relevant House oversight subcommittee on Google’s privacy problems.

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Goobook Ad Cartel Series

Part 1: EU-Google Antitrust Cases’ Implications for Amazon Facebook & Apple [7-22-16]

Part 2: Why Did Google & Facebook Stop Competing With Each Other? [8-3-16] 

Part 3: Google’s Information Is Power – Info-opoly Power [9-18-16] Googleopoly XXIV

Part 4: Will FCC Allow Competition to Google’s & Facebook’s Advertising Monopolies? [8-10-16]

Part 5: What No Bids for Twitter Tell Us about Google Facebook & Online Advertising [10-21-16]

Part 6: America’s Indefensible Media Concentration Double Standard [1-5-17]

Part 7: The Google-Facebook Online Ad Cartel is the Biggest Competition Problem [1-12-17]

Part 8: Twitter & Snap Evidence Confirm Goobook Ad Cartel Crushing Competition [2-10-17]

 

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