Neil Dwane: De-FANGed: 5 Ways the Disrupters Could Be Disrupted

Neil Dwane: De-FANGed: 5 Ways the Disrupters Could Be Disrupted

“Bots” and automatic algorithms have completely transformed the realm of digital advertising and brought in billions of dollars in revenue for Facebook and Google. Yet an old adage still rings true today – “half the money I spend on advertising is wasted; the trouble is, I don't know which half”. If doubts about ad-sales effectiveness and practices grow, they could undermine social media business models and the profitability of the FANGs.

  • Some firms may be overstating the reach and effectiveness of their technologies. One mega-cap US consumer-goods company recently made headlines when it slashed its online ad spending, citing “largely ineffective” digital ads.
  • On the other hand, some of these ad-sales platforms may work too well, bringing into question the professed “platform neutrality” of some Big Tech companies. Amid growing concerns about Russia’s role in recent US elections, Facebook recently bought its own high-profile ads to detail how it is “protecting our community from election interference” – a clear response to calls for them to police their network.

"Questions are arising about the “platform neutrality” of some Big Tech companies"

2. “Free” content dilutes brand loyalty and bottom lines

Even though social media has become part of our daily lives, how much brand loyalty does it inspire? Surveys show that use of social media would drop if consumers had to pay for access – or they would migrate to other “free” services. This has implications for corporate longevity. Some may not endure in the same way as companies in more traditional industries once did with similar size and scale.For its part, Google has recently announced it is dumping its “first-click-free” news policy, which had forced media companies to offer some free content or see their search-engine rankings plummet. This can be seen as a way of helping to support digital subscriptions – and therefore funding – for news providers. Google may also hope this heads off more onerous regulations by positioning them as good corporate citizens, and by reinforcing their stance that they are not a media company.

3. Unused cash grows costly

The FANGs remain extremely profitable, yet much of the cash they generate languishes on balance sheets. The result is billions of dollars left unused, un-returned to shareholders and unable to boost economic growth – and in many cases untaxed as well. This is growing increasingly frustrating for almost everyone but the cash-rich companies themselves. Unfortunately, there may not be much shareholders can do about it – the “founder’s stock” structure used at some firms does not always create an environment of good corporate governance – though active investors can try to effect change. Regulators have more power, however, and they are clearly looking for ways to claw back some of this cash.
"Regulators are looking for ways to claw back some of the cash sitting on balance sheets"

4. Regulators crack down on data privacy

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