NEW YORK - Three digital giants in the world of digital advertising are no better than two. The dominance of Alphabet’s Google and Facebook over the U.S. online ad market faces a growing challenge from Amazon. The case for better regulation will remain as strong as ever.

For the first time this year, research outfit eMarketer estimates that the combined share of Google and Facebook will fall. That marks a peak, kind of. The decline is tiny at around one percentage point – and is driven by Google rather than Mark Zuckerberg’s social network. Also some perspective is needed: the overall market will still increase by 19 percent to $129 billion, and they will still have almost 60 percent of it.

Eventual numbers may prove otherwise – eMarketer had also predicted a decline in the duopoly’s share last year. Yet Amazon is unmistakably nibbling at the big two’s slice. The piece of the pie claimed by Jeff Bezos’s firm is expected to grow to 8.8 percent this year versus 6.8 percent last year. If Amazon could keep that pace of advance up for another five years it would have nearly one-fifth of the ad spend market – not far from Facebook’s share now.

The extra competition is cold comfort. The absolute scale of these companies – with a combined market capitalization of $2 trillion – and of the customer data they hold is still troubling. Regulators are taking notice. New U.S. Attorney General William Barr indicated the Justice Department will look harder at antitrust in the tech sector. California will soon implement a new data privacy bill. Closer scrutiny is coming – no matter whether it’s for three or two.

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CONTEXT NEWS

- Google and Facebook’s combined share of the U.S. digital advertising market is forecast to fall in 2019 for the first time, according to research firm eMarketer.

- The slice held by search engine Google, part of listed company Alphabet, is expected to drop to 37.2 percent from 38.2 percent in 2018. Social network Facebook’s will dip to 22.1 percent from 21.8 percent.

- Amazon’s share of digital advertising is expected to grow to 8.8 percent from 6.8 percent.

- The total U.S. digital ad market is expected to increase 19.1 percent overall to $129.3 billion.

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(Editing by John Foley and Amanda Gomez) ((jennifer.saba@thomsonreuters.com; Reuters Messaging: jennifer.saba.thomsonreuters.com@reuters.net))