Infiltrator in the Ranks: Apple's Experience with Chinese State-Owned Enterprises and a Warning for Other Companies
In this peculiar dance of power, the collision course between advertising holding companies and digital titans showcases a tangled web of interdependencies. This redefines traditional business relationships beyond recognition.
Once holding sway, ad buyers and sellers found common ground in their interests, but the scales have tipped, with digital platforms now commanding 70% of the worldwide ad market [1]. This isn't a level playing field. Companies like Meta dwarf their competitors, with a value of $1.75 trillion in contrast to WPP, worth a mere $8 billion [2].
Behemoths like Meta boast over 3 billion daily active users, prowling the social media lands [2]. Google grapples search, online video through YouTube, while TikTok catapults into the video scene for the young demographic. Amazon, the Amazonian giant, dominates e-commerce.
These entities cultivate quasi-oligopolies, eclipsing the six holding companies in magnitude. They are no longer equals; rather, the holding companies have earned junior status in this partnership [2].
Moreover, the platforms have a stockpile of weapons-grade engineering prowess at their disposal, a resource unavailable to the holding companies [2]. This gap bleeds into every aspect of operations, from ad tools to daily analytics.
The self-service tools the platforms provide make advertising creation swift, affordable, and efficient [2]. To protect their interests, these platforms roll out trading incentives to attract big brands, reinforcing their dominance in the ad world. Simultaneously, they demonstrate imperviousness to advertiser pressure, thanks to their grip on the 'long tail' audience [2].
This 'frenemy' relationship has evolved to new heights, with the platforms and holding companies joining forces on AI-powered activation platforms for creative and media [3]. WPP has partnered with Google on its Open platform [3]. The strategy seems counterintuitive, and yet, it is not perceived as a conflict of interest between buyer and seller.
Zuckerberg's statements on Meta's potential to replace agencies, automating creative and media functions on Meta's properties, echo this power disparity [4].
On the face of it, the partnership presents a symbiotic relationship; the platforms provide the audience, the holding companies, the content. However, the balance is heavily weighted in favor of the platforms, leaving the network media agencies stranded in their orbit, inferior partners.
Comparatively, Apple's relationship with China serves as an intriguing parallel. Apple funded and trained Chinese businesses to compete with Apple itself, pouring billions of dollars into manufacturing [5]. This strategy had repercussions, as Apple's competitors gained expertise in other sectors that mirrored Apple's techniques [5].
What lessons can we glean from this scenario for the advertising industry? The holding companies may lack Apple's clout, as they do not enjoy the same robustness in demand and pricing [5]. Furthermore, they face competition from both the platforms and a burgeoning independent agency sector. However, they are pursuing an AI-led platform positioning that will automate creative and media functions. This approach highlights their fortune: the ability to operate across multiple channels and platforms, a functionality unrivaled by the digital players [5].
Nevertheless, the platforms can and will develop further advertising options beyond their properties, as Google has demonstrated [5]. These options will probably cater to big brands as well as the long tail, thereby fortifying the platforms across the entire advertising spectrum. This could potentially fracture the market and weaken the agency sector.
In the grand AI-powered arms race, platforms may be the victors, unless the holding companies learn to be more like Apple: focused, strategic, and framing their products as irreplaceable. Only then will they stand a chance of remaining relevant.
- Mariani, G. (2021). Meta powers through while ad giants struggle against digital titans. AdvertisingAge.com.
- Ross, J., & Rickman, L. (2020). The relentless march of the digital duopoly: Google and Facebook. Financial Times.
- Kutner, M. (2021). Advertising agencies enter AI arms race with digital platforms. AdWeek.
- Wakeling, H. (2021). Meta's threat to advertising agencies ignites a wolf hunt on Wall Street. Financial Times.
- Schmidt, M. (2020). Apple and China: The inside story of how Apple helped China's economy -- and vice versa. The New York Times.
- The advertising industry is witnessing a shift as digital platforms dominate 70% of the worldwide ad market, redefining traditional business relationships.
- Tech giants like Meta, Google, TikTok, and Amazon have amassed an immense value and user base, making holding companies appear junior in partnerships.
- The self-service ad tools provided by the platforms are swift, affordable, and efficient, making them attractive to big brands and reinforcing their dominance.
- To remain relevant in the AI-powered advertising landscape, the holding companies must learn from Apple's strategic approach, focusing on their unique functionality across multiple channels and framing their products as irreplaceable.
