There’s been massive coverage of Netflix these past few days, with analysts agonising what impact a price hike might have on its revenues and profits and how quickly the price rises might spread to their International markets.
That’s understandable, but a very timely report from the media team at investment bank Berenberg suggests that it is three competitors – Facebook, Amazon and Google – that pose the greatest threat, not least in terms of their impact in the advertising section of newspapers, and the knock-on effect on broadcasting/media groups.
Facebook, Amazon and Google, says Berenberg, have such might with their huge audiences that many, many industries should be taking note. “Through their big audiences, high ambitions and deep pockets, have revolutionised a number of industries over the years. We think any interest by such companies in the classified space should be taken seriously; however, in a time-scarce world, even Facebook, Amazon and Google have priority lists, and therefore we do not believe that the risk from these companies is uniform across all verticals and countries. In our view, Facebook Marketplace, with its vast community that shares information daily, can be a disruptor in the more fragmented peer-to-peer markets such as autos and property rental. Amazon, with its deep understanding of consumers and tech capabilities, can bring a new direct to consumer (D2C) route for carmakers which have traditionally been slow to move into D2C. Meanwhile, Google can add value by aggregating jobs in fragmented markets like the UK and the US. We believe this is likely to disrupt traditional job boards.”
Berenberg says that property advertising, car retailing and a dozen other valuable sectors could be dominated by the Facebook, Amazon and Google. For example, says the bank, “The sheer scale and connection with the user community that Facebook has built, makes Marketplace well placed to serve and grow the private market in cars and property. The more fragmented and disorganised the end-market, the greater the need for a super-aggregator and the more value a new player can add. We estimate that c50 per cent of autos,43 per cent of property-for-sale, and c50 per cent of property-to-rent in Germany and c40 per cent of property-to-rent and c38 per cent of autos in the UK are traded in the private market.”
The bank’s study says that Facebook already “owns” one out of every 6 minutes that we typically spend online. It is much the same at Amazon and where its influence is enormous. Retail sales, notably in the US are showing miserable growth levels, while Amazon is growing at 30 per cent annually. “The company has now captured 48 per cent of e-commerce sales (9.8 per cent of US retail). The next nine largest online players combined captured c21 per cent.”
As a result, Berenberg is reiterating its ‘SELL’ rating on Axel Springer, the giant German publisher, despite Springer’s move into digital advertising. Much the same argument applies to other media groups shifting into digital advertising.
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