At first, Netflix seems like its business would have nothing to do with Facebook and Google. The latter two are advertising platforms for other people’s content. Netflix is spending $6 billion a year to buy its own content, and it doesn’t show ads.

But zooming out to consider the full scope of the media landscape, this tech triumvirate is surprisingly interrelated, as one can see Mary Meeker’s annual slideshow extravaganza of tech and media trends. In many ways, the Netflix revolution in TV has created the perfect conditions for Facebook and Google’s extraordinary growth in mobile.

Here is the story, in three chapters.

1. Netflix is eating television.


Kleiner Perkins

When it comes to television, there are two Americas. In one country—Americans over 65—traditional TV is only getting more popular: The average number of minutes watched is rising, sending ratings for shows with older audiences, like cable news, to historic levels.

In another country—Americans under 65—the crisis for traditional TV couldn’t be more acute. Viewership is collapsing among people under 40, and merely falling slowly for people in their 40s and 50s, as millions of people abandon cable for subscription-based services such as Netflix and its brethren: Amazon Prime, HBO Now, Showtime, and Hulu. In the last five years, total viewership has declined by double digits on NBCUniversal, Disney, Time Warner, and Viacom—all of which sell ads against television—while Netflix is up almost 700 percent.

In the long run, the country is clearly moving toward subscription television. That’s bad news for ad-supported TV.

Television currently accounts for 38 percent of U.S advertising. If viewership continues to shift toward subscription TV, where there are no (or far fewer) ads, that money has to go somewhere. Companies aren’t just going to stop advertising because Americans like House of Cards without commercial breaks.

So where will that advertising go? To phones.

2. Mobile is eating advertising.



Every year, Meeker produces this graph, a longtime favorite of mine, which breaks down attention and advertising by medium. Five years ago, mobile was one percent of the U.S. advertising-spending pie. Now it’s 21 percent. Since 2012, print has lost 13 percentage points and television has lost five.

The long dominance of the old-fashioned cable bundle was a bonanza for many companies, from content producers like Disney and Time Warner to cable- and satellite-TV companies, like Comcast and DirecTV. But the emerging dominance of mobile is a bonanza for two: Google and Facebook. When you look at that rightmost column of mobile’s share of U.S. advertising, just remember that half of that column is two companies.

3. As advertising flees from television, Google and Facebook will benefit.



The disruptive success of Netflix has kicked off a gold rush in original streaming TV, turning off younger viewers from ad-supported television, which will push that medium’s advertising to mobile. There, two companies await with open arms. Facebook and Google already account for half of the mobile ad market and 85 percent of total Internet advertising growth. As the tech and media analyst Ben Thompson writes on Google and Facebook: “There really isn’t room for anyone else.” The frontier is closed.

The cord-cutting revolution isn’t just feeding into Google and Facebook’s bottom line; what’s more, those two companies are direct participants in the cable bundle’s unwinding. Time on Instagram (owned by Facebook) can replace time on television; Facebook is trying to turn its News Feed into a social television feed; Google owns YouTube, which not only substitutes directly for television on music videos, highlights, and more, but also has its own cable-bundle lookalikes.

In sum, Netflix has kicked off a revolution of subscription-only TV, which means people are seeing fewer ads on their largest screen. As a result, advertisers will have to chase down these younger viewers on their mobile devices, where Facebook and Google have essentially staked out a duopoly on monetizing search and social. Before long, Netflix, Facebook, and Google may find themselves competing for television programming, adding to the glut of entertainment that has made life so difficult for traditional cable channels. But for now, Facebook and Google could not have hoped for a better ally than Netflix.