Data shows VC investment into ad tech has fallen sharply in recent years, speeding consolidation, as Google and Facebook solidified their grip on digital ads
Claire Ballentine / New York Times :
Context & Ripple Effects
This piece lands mid-arc in the Madison Avenue revolt against the Facebook-Google duopoly: months earlier, advertisers were already pushing aggressively for changes amid the Facebook fallout, per the fight between the platforms and Madison Avenue. What the new funding data adds is the capital-markets verdict — startups are no longer being financed to challenge the incumbents.
The pattern held beyond ad tech itself: Ian Hathaway's analysis found first VC financings for startups exposed to Google, Facebook, and Amazon core activities declining 25% to 40% annually since 2015, confirming this as a platform-economy phenomenon rather than an ad tech blip. The later dismantling of personal-data-based advertising shows why the independents' position kept eroding even after consolidation.
First-order effects
- Ad tech startups lose their funding path: with VC investment falling sharply, the realistic outcomes narrow to acquisition by Google, Facebook, or a larger ad platform rather than independent scale.
- Google and Facebook consolidate share without spending to compete — every funded rival that folds or sells hands them inventory, data, and advertiser relationships at distressed prices.
Second-order effects
- Advertisers already nervous about the duopoly lose their counterweight: fewer independent intermediaries means less pricing leverage in negotiations with Google and Facebook, hardening the dynamic behind the Madison Avenue pushback.
- Publishers and small companies dependent on the open ad stack inherit a thinner vendor landscape, and when shocks hit — like Facebook's CPM collapse to $1.95 during the pandemic — they have fewer alternative buyers for their inventory.
Third-order effects
- Capital formation restructures around platform gravity: if first financings keep declining 25-40% annually in sectors exposed to Google, Facebook, and Amazon, entire categories stop producing challengers and innovation migrates inside the incumbents' walls.
- The consolidated stack becomes fragile to regulatory and platform-level shifts — Apple's ATT changes later forced advertisers to rebalance budgets toward Google, Amazon, and TikTok, showing how dependent the whole ecosystem is on a handful of gatekeepers' policy decisions.
The trend: Venture capital is systematically withdrawing from markets where Google, Facebook, and Amazon control the core activity, making consolidation into the incumbent platforms the default exit for ad tech and adjacent startups.