Facebook is “winning the battle for eyeballs and advertising in the internet display arena,” according to a report by Enders Analysis. While Google is still “the king of internet advertising” with greater global reach than the social network, Facebook’s more dynamic growth, and rising rates of engagement and usage, suggest it will continue to dominate the display ad market going forward.
Google’s net display ad revenues totaled $1.5 billion in 2010, according to Enders Analysis, and will rise to $2.5 billion in 2012. Facebook, on the other hand, will report 2011 display revenues at about $3.5 billion, and can expect those to rise to about $5.3 billion in 2012.
While Facebook is clearly the market leader in display, Google remains the internet’s largest advertising player. In 2012, its revenues will hit $35 billion, 90% of which come from Google’s search operations.
Bringing all these numbers together is the fast-growing display ad market. The company founded by Sergey Brin and Larry Page has proven its capacity in transforming the search ad market, becoming practically a monopolistic force. But display remains underdeveloped. According to former Google CEO, and current Chairman Eric Schmidt, the display market could grow to $200 billion in coming years. “Despite Google’s and Facebook’s growing strength, the online display market remains highly fragmented, [Enders Analysis] project[s] their aggregate share of global spend will be just over 25% in 2012.”
There are four major players in the display ad world: Facebook, Google, Microsoft, and Yahoo. Google and Facebook exert their dominance via reach and consumption. In terms of monthly unique visitors, Google beats its competitors with 1.1 billion users, about 75% of the global audience. Facebook counts with 770 billion, but is growing at an impressive pace, accounting for 18% of the net increase in internet usage in Q3, compared with a combined 1% for Google, Microsoft, and Yahoo combined.
Mark Zuckerberg’s social network derives its strength from engagement. Users spend an average 12 minutes per day on Facebook, a figure that is up 40% over the last 12 months. That’s about 15% of total time spent online, compared with something like 10% for Google (which ranks second among the big display players).
Facebook’s “expanding reach and rising time spent on the site” are the keys to its display ad success. Revenues will continue to grow faster than over at Google, particularly given the rise of the social media ad format and the surge in programmatic ad buying (through the use of exchanges, networks, demand side platforms, etc) which will make it easier to “programme [sic] and optimize large-scale ad campaigns.”
Also playing to Facebook’s favor is Google’s weakness in the social sphere. “At this stage, Google’ late entrant look-alike social network, Google+, looks set to remain niche,” explained the analysts.
Facebook has slowly opened up its display ad platform to outer players, and will continue to improve it through the addition of new products, such as the “rumored rollout of ads on its highly popular mobile apps” (which run on Apple's iPhones and Google's Android OS). But these don’t necessarily play against Google. As mentioned above, the market is fragmented and small, and still has room to grow. “Rising advertiser demand for both scale and performance will make many publishers increasingly reliant on one or both of the internet giants for traffic and revenue growth,” explained the analysts.
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