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Google and Meta’s advertising dominance fades as TikTok, Netflix emerge

Amazon further solidified its spot as third-largest digital-ad platform in the US last year. For the first time in nearly a decade, the two largest players in online advertising are no longer raking in the majority of US digital-ad dollars, a decline that industry insiders expect to continue in years to come.

Alphabet Inc.’s Google and Facebook parent Meta Platforms Inc. accounted for a combined 48.4% of U.S. digital-ad spending in 2022, according to estimates from research firm Insider Intelligence Inc. Their combined U.S. market share hadn’t been under 50% since 2014, said Insider Intelligence, which expects that number to drop to 44.9% this year.

The ad businesses of Google and Meta are still growing, but Insider’s data suggest the pace is slower than the rest of the U.S. digital-advertising market. Insider forecasting analyst Zachary Goldner said the erosion of their combined market share was the result of brands having access to more advertising formats.

“All marketers want more options," Mr. Goldner said.

Google and Meta each faced headwinds in 2022, as people spent less time online than in the early days of the pandemic; marketers concerned about a possible economic downturn reined in ad spending; Amazon.com Inc. and ByteDance Ltd.’s TikTok continued their emergence as a force in digital advertising; and more streaming services started to embrace advertising.

Meta and other social-media companies including Snap Inc. also suffered from Apple Inc.’s 2021 decision to require apps on its devices to ask users if they wanted to be tracked. The majority of iPhone users opted not to be, hitting the heart of Meta’s business: its ability to target ads at users with precision and prove to marketers that the ads generate sales.

Google wasn’t as affected by Apple’s move, because its flagship search-ad business relies on customer intent—users’ search terms immediately reveal what they are interested in—rather than data collected from app and web tracking. Its U.S. digital-advertising market share slightly rose to 28.8% in 2022, Insider Intelligence said, but is expected to fall to 26.5% this year.

Google didn’t respond to a request for comment. On the company’s most recent earnings call in October, executives talked about how search-based advertising tends to do well during challenging economic times.

Meta had no comment. In its most recent earnings call, Meta said the tracking restriction continued to affect its ad business but noted the effect had diminished. Apple’s tracking restriction had an impact for emerging e-commerce companies, which are important to Meta’s ad business. Supergut Chief Executive Marc Washington said the maker of gut-health products used to spend about 80% of its ad budget on Meta’s Facebook and Instagram platforms, with the rest going to Google. In early 2022, he noticed that the cost of bringing in new customers through advertising on Meta’s platforms was twice as high as it was before Apple’s privacy changes. Supergut shifted about half of what it spent on Meta to TikTok, a short-form video platform popular with younger audiences.

Mr. Washington said Meta remained Supergut’s most efficient advertising platform, but said there are early indications of “TikTok ads performing as well and in some cases better than some of our Meta campaigns."TikTok’s command of the U.S. digital-ad market more than doubled in 2022, Insider Intelligence said, thanks to its nearly 100 million U.S. monthly active users, the virality of the platform and its hold over Gen Z, millennials and influencers. Still, its overall share remains small, accounting for 2% of U.S. digital-ad spending, according to Insider Intelligence, which expects that number to grow to 2.5% this year.