Throughout 2018, investors fretted that Facebook (FB -3.38%) and Alphabet (GOOG -0.18%) (GOOGL -0.08%) subsidiary Google were losing market share to companies like Amazon (AMZN -1.83%) and Snap. The combination of external competition, internal growth challenges, and controversies regarding privacy and user data led many to believe the duopoly would see slower growth than the rest of the market.

It turns out advertisers still see Facebook and Google as a better-than-average place to put incremental ad dollars. The two companies saw their combined share of the U.S. digital advertising market increase 70 basis points to over 60%, according to the latest estimates from eMarketer. The research firm previously expected a 1.5-percentage-point decline in their collective market share in 2018.

Investors should consider why Facebook and Google were able to grow their market share despite various challenges in 2018 in order to determine where the market goes from here.

Image source: Getty Images.

All about scale

The biggest appeal of Facebook and Google is the ability to reach billions of internet users and target them with excellent data. Facebook says its family of apps reach 2.7 billion unique users, more than 2 billion of whom log into at least one app every day. Google's YouTube reaches over 1.8 billion users monthly. And YouTube is just one of eight Google products with over 1 billion users.

Facebook and Google's reach completely overshadows the competition from other social media companies. Snapchat has just 186 million daily active users and Twitter has even fewer monetizable daily users at 126 million. Pinterest has 265 million monthly active users, but doesn't say how many log in daily.

Furthermore, many of these larger social networks have user bases highly concentrated in certain demographics. Snapchat is most popular with younger users. Twitter appeals to users most interested in news, sports, and entertainment. Pinterest says 8 out of 10 moms in the United States use its app. Meanwhile, Facebook and Google products are used universally.

That's not to say having a more demographically concentrated user base is a bad thing, but as ad budgets shift from broad-based television commercials to digital advertising, marketers may be looking to replace ad buys with a like-for-like purchase. Additionally, the targeting capabilities of Google and Facebook make it easy to find any specific audience within its user base.

Check out the latest earnings call transcripts for Facebook, Alphabet, and Amazon.

The one competitor with scale and data

Of all the threats to the Google and Facebook duopoly, Amazon is, by far, the biggest. The retail giant's advertising business seemingly went from $0 to $10 billion overnight as the company started investing in better ad products and buying platforms for vendors and third-party merchants.

That growth is indicative of several advantages Amazon has compared to smaller companies.

First, Amazon has a built-in audience of consumers ready to buy something. About half of product searches in the U.S. begin on Amazon.com. There are over 100 million Prime households spread throughout the world. Amazon's devices -- Kindles, Echos, Fire TVs -- are constantly top-selling items on its marketplace and extend the retailer's tentacles further into customers' lives.

Second, the amount of data Amazon has on its shoppers is comparable to Google or Facebook. It knows what customers are searching for just like Google. More importantly, it knows what they actually spend their money on. It knows what videos they watch on their Fire TV and what music they listen to on their Echo speakers. It knows who customers are buying gifts for. It knows who registered for a wedding and who registered for a baby shower. Amazon might even know what you want to buy before you know you want to buy it.

Finally, Amazon has a built-in customer base for its ad products. Facebook has over 90 million small businesses using its products, and Google sees millions of businesses posting promotional videos on YouTube that they can offer advertising to. Likewise, Amazon has millions of third-party merchants and vendors looking to advertise on its platform.

It's no surprise eMarketer expects Amazon to grow its share of the digital ad market by 2 percentage points this year. Meanwhile, it expects Facebook and Google to lose about 80 basis points this year.

But if investors look at Facebook, Google, and Amazon combined, the three are increasing their market share. Investors should expect the trend of the properties with the biggest reach and best targeting data to continue to grow their total share of the market at the expense of the smaller players. Perhaps it's no longer a duopoly; maybe it's a triumvirate.