Mobile Ads business proves to be hard nut to crack
Google Inc. (NASDAQ:GOOGL) is finding mobile advertising a little bit difficult to crack. Possessing the first mover advantage, the search engine giant dominates internet advertising. It has been an online advertiser since the year 2000. However, it trails Facebook (NASDAQ:FB) in mobile ads. Last year, its mobile ad revenue stood at $3 billion, trolled by the social media platform’s $3.28 billion. In the quarter ending June, Google reported an astounding 22% revenue growth. Nevertheless, the results revealed that its cost-per click is declining courtesy increased competition, particularly from Facebook.
The Mobile ad Market
In the last quarter, the number of Facebook’s ad impressions on mobile devices surpassed that on the desktop. According to data from eMarketer, the social media’s mobile display ad revenue grew by 50.5% year-over –year (YoY) in the US, dwarfing Google’s 33.3%.
Facebook has refined its strategies towards bolstering its users’ interaction with its ads, be it mobile or internet. But mobile ads seem to be its goldmine, since these ads now account for 59% of Facebook’s total ad revenues. Facebook had earlier been tipped to lead mobile advertising. In fact, after its IPO, its share price tumbled as a result of poor monetization of its mobile market. After getting its mojo back, the social media network is proving to be a pain in the ass for the world’s leading search engine and e-advertising giant. In 2012, Facebook’s accumulated display ad revenue was $2.18 billion, trailing Google’s $2.25 billion. After overtaking the search engine company last year, Facebook is continuing to open the gap. Its mobile app platform is now also the leader in in-app advertising. eMarketer revised its earlier Facebook’s digital display revenue forecast of $3.35 billion, and it now estimates that the social network will collect $4.8 billion to Google’s $4.0 billion in 2014.
Google’s ad prices have been declining for the past two years. The 2014’s second quarter saw the cost per click drop by 6% compared to 2013’s second quarter. Cost per click is the price that advertisers pay whenever somebody clicks on an ad. It is however difficult to tell how much earned from mobile ads, given that it does not separate it from desktop ad revenue. But the truth is, Google is yet to gain traction in mobile ad market as Facebook has. In 2013 Google’s mobile ad market dropped from 49.8% it held in 2012 to 41.5%. Facebook on the other hand gained 9% over the same period to take its market share to 16%. Isn’t it obvious that the social media giant is eating into Google’s market share? Google is a much diversified company than Facebook. Even in ad business, it collects revenues from search ads, YouTube, and other partner sites. YouTube ads relatively earn more money. In 2013 alone, the company collected a net of $2 billion from these ads, which was 5.6% of its total net ad income that year.
Digital marketing is quickly shifting from PCs to mobile devices, with smartphones leading the pack. So while Google continues to experience growth, it needs to find a way to crack the mobile ad market which is driving Facebook’s phenomenal growth.