Is Facebook a Daunting Threat to Google?

Facebook Inc (NASDAQ: FB) and Google Inc. (NASDAQ: GOOG, GOOGL) lead in ad revenue. Google is way ahead of Facebook; but the world’s number social network has been making impressive progress in the mobile space. The search engine giant this year landed ad revenue of $14.3 billion in the second quarter compared to Facebook’s $2.68 billion. Ad revenue covers 90% of the companies’ overall revenue.

Facebook seems to have captured the mobile scene as Google remains struggling.  Facebook’s mobile ads hit 60% of its total ad revenues while Google reaches only 12%.   Chances are the social networking company is becoming the world king of mobile ads in two to three years.

Facebook mobile ad kit

Facebook has pinched a few plays from Google, such as the self-service tool, a clear knock-off from Google AdWords. In October 2012, Facebook also launched Mobile app-install ads. App-installs drive more traffic to Facebook ads and lure users to download them. Since the introduction, Facebook has had more than 350 million apps downloaded. With $2 to $4 paid per download, Facebook is reaping big, according to Macquarie Equities Research. Facebook has also added lots of tools to drive traffic too mobile ads such as Use App, Watch Video, Listen Now, Shop Now, Play Game and Open Link.

The “cross-platform platform” mobile development tool announced by Facebook during this year’s f8 developer conference, among others, is set to be mobile developer friendly as it cuts across Android, iOS, and Windows devices. This is bound to lure many mobile developers. Facebook is additionally offering the mega SDK (software developer kit) to mobile app developers that will be created around app marketing services.

Google’s Key Vantage Points

There is no gainsaying Google is facing a tight competition from Facebook as far as monetizing ads is concerned, especially mobile ads. However, Facebook can’t touch the paid search Google’s money pot, and has no product to compete with that.

For now marketers still prefer Google to Facebook as a digital marketing platform. Forrester Research’s last year survey confirmed that people still prefer search marketing, which is Google main forte.

Forrester Researcher’s Nate Elliot, in an open letter, questioned Facebook chief executive Mark Zuckerberg for failing marketers. Only 16% of Facebook users ever see a brand post. Worse, only 15% of the ads ever hit the target of audience. In short, Facebook reaps big but hardly get marketers reaching their intended target audience.

This is not Facebook’s fault since they face the dilemma of satisfying the marketers and making itself unpopular to users by serving unsolicited ads or service less ads to retain a happier traffic.

Google however has a free way here as their ads responds to certain keywords users place in their search queries, making them more helpful to users.

Google has faced a decline in CPC due to two main reasons. One: more clicks come form emerging markets outside North America and secondly, the growth of mobile ads pulls down the CPC, given Mobile CPC is typically lower than desktop CPC.

Bottom line

Facebook is rapidly rising as one of the most dominant players in online ad scene, but this is in no way impacting negatively on Google’s growth. With the two giants running roughly distinctive paths in a fast growing market, there is sufficient space for co-existence without a cause of brawl.