The Digital Advertising Contest Between Google And Facebook Is Intensifying

Brace yourselves for a stats-centric blog. Having gone through this week’s annual reports from big tech, there have been some important developments in the digital advertising space. These of course hold significant implications for content monetisation, as whilst subscriptions remain the core driver of growth, ad-supported content is a vital component of overall revenue.

Google has been the dominant player digital advertising for years, but its competition with Facebook is intensifying. The stats below emphasise the distinctions between US and UK digital advertising for both companies.

Google is resilient in US Market Share: Google’s market share of digital advertising was approximately 53.8% in the US, whilst its share of the YoY growth from 2016–2017 was 53.2%; a marginal decline, but still enough to maintain, almost identically, its market share from the previous year at 53.7%. Facebook’s market share on the other hand was 21.1%, up from 2016.Facebook however is siphoning UK digital ad spend: In the UK it is a different story. Google still commanded 49.5% of market share in the UK, but its share of YoY growth was just 31.7%. However, Facebook’s UK YoY revenue more than doubled to $4 billion, meaning it took 61% of total UK digital ad growth and increased its overall market share to 21.7%, up from 12.3% the previous year.Facebook’s UK growth is faster than Google’s: In the UK, Facebook grew 166.7% YoY to reach revenues of $4 billion, Google’s was 16.7% - below the overall digital market growth in the UK of 28.7%. Given this trend towards Facebook, growth of the platform has been consistent for the last three years. Clearly advertisers in the UK are beginning to favour Facebook’s platform over Google’s - a worrying trend given the territory remains the world’s 2nd largest digital ad market.Both are increasing their dominance of the overall space in the UK and US: Whilst it is no secret that Facebook and Google have created a duopoly in digital advertising, the extent and speed at which these companies are swallowing revenue is often understated, as well as the second-order effects on the advertising industry this development creates. For example:71.2% of the total UK digital ad market and 92.7% of the growth74.8% of the total US digital ad market and 90% of the growth

Effects on music monetisation:  30.8% of music streaming revenue in the US, as highlighted in my blog last week on Pandora’s impact on the overall market, is from ad-supported sources, representing 17.6% ($1.3bn annually in 2017) in the world’s largest music market. Given these two companies’ dominance over the ad space, two implications are plausible:

Facebook’s long anticipated entry into music will focus on cornering the ad-supported market, consolidating their market share and giving them a beach-head into other content offerings.Other company's relying on this market for revenue (Pandora, Spotify), will need to maintain continuous growth in subscriptions if they are to compete against Facebook and Google.

With more competition is entering the space (Snapchat, a seemingly rejuvenated Twitter, Amazon's fast growing ad business), and the spectre of regulative intervention, expect these metrics to look very different over the next two years.