These 5 companies are becoming increasingly dominant in the market; today, they are all in the top 8 largest companies by market cap. As markets become more digital, it looks like they are also becoming more winner-take-all. While market cap is becoming more concentrated in these companies, ad revenue is also becoming more concentrated.
Given that Amazon is estimated to have generated around $1 billion in advertising revenue, it’s likely that Amazon grew it’s advertising revenue by more than $40 million Q3 16 v Q2 ’16. The point is, that taking FAMGA out of the equation, the market is actually shrinking. What happens in shrinking markets? Innovation is stifled due to lack of competitive reasons to innovate, and due to lack of resources. CBInsights reported that global ad tech funding fell 33% in 2016 to $2.2 billion, from $3.2 billion in 2015, putting it back to where it was in 2013. That decrease is innovation withering in the ad tech market.
Since ad revenue towards these companies translates into less ad revenue going to other companies, this should cause innovation to decrease on a broader scale. Similarly, this would also put these 5 companies in position to dominate other markets and acquire other companies.
Software is increasingly eating the world. Technical superiority is increasingly the largest factor in who dominates different markets. Then it makes sense that FAMGA will increasingly dominate other markets.
As the world shifts towards e-commerce, will these 5 companies continue to grow their market share? Will innovation be hurt or helped?
