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Google Edges Closer to Facebook as US Display Advertising Becomes Two-Horse Race

Google will outpace Facebook’s display ad revenues by 2013

Facebook passed Yahoo! last year to become the top display advertising seller in the US, but the company’s lead may be short-lived. Google’s display business is growing faster than anticipated—and is set to surpass Facebook’s next year, according to a new forecast by eMarketer.

Display Advertising Revenues:

Net US display advertising revenues at Google reached $1.71 billion in 2011, just below the $1.73 billion Facebook earned the same year, according to eMarketer. This year, US display revenue growth at both companies will be nearly identical—around 48% year over year—with Facebook expected to earn $2.58 billion in revenue, compared to Google at $2.54 billion, eMarketer estimates.

Google is expected to surpass Facebook in 2013, when the company’s US display revenues grow 45.3% to $3.68 billion, eMarketer estimates. US display ad revenues at Facebook will grow 27.6% to $3.29 billion that year.

The overall US display advertising market, which includes spending on online video, sponsorships, rich media and banner advertisements, grew 25.2% to $12.4 billion in 2011, eMarketer estimates, and will increase to $15.39 billion in 2012.

Facebook’s share of overall US display ad market revenues grew to 14% in 2011, up from 11.5% in 2010. This year, Facebook’s share is expected to grow to 16.8%. By comparison, Google’s share of US display ad revenues is expected to reach 16.5% in 2012, up from 13.8% in 2011 and 12.1% in 2010, when the company closed its deal to purchase AdMob.

Both companies are pulling away from other contenders in the display category. Combined, Google and Facebook’s display ad revenues will account for 33.3% of total display ad spending in 2012, eMarketer predicts, rising to 38.8% in 2014.

Meanwhile, eMarketer estimates Yahoo! will see its share of the US display market fall to 9.1% this year, from 10.8% in 2011—a far cry from 2008, when Yahoo!’s share of US display revenues peaked at 18.4%—despite the company’s continued revenue growth. Microsoft's share of display revenues will shrink to 4.4% this year from 4.5% in 2011, eMarketer estimates, while AOL’s share will fall to 4% in 2012, from 4.3% last year.

Changes from Previous Forecasts:

This forecast incorporates a stream of newly available data, including reported figures from major players such as Facebook and Google.

The forecast also features a significant upward revision for Google’s display business compared to previous eMarketer projections—a result of stronger-than-expected performance from the company’s mobile display business, YouTube’s growing role as a venue for premium display inventory, and strong growth from the company’s DoubleClick ad network. The strength of Google’s existing relationships with search advertisers has also been a tremendous help for the company’s display business, according to eMarketer principal analyst David Hallerman.

At the same time, eMarketer revised its figures for Facebook downward slightly after the company’s S-1 filling revealed a slower-than-expected growth rate for 2011, particularly in the fourth quarter.

eMarketer previously estimated in July 2011 that US display advertising revenues at Google would top $1 billion in 2011 as the company’s share of US display revenues rose to 9.3%, up from an 8.6% share in 2010. The previous forecast estimated Facebook would earn $2.01 billion in US display ad revenues in 2011—accounting for a 16.3% market share.

eMarketer forms its forecast for online advertising spending through a meta-analysis of estimates from research firms that track ad spending and impressions; reported data from major advertising publishers; results from its benchmark source, the Interactive Advertising Bureau/PricewaterhouseCoopers; and other sources. eMarketer also conducts interviews with executives at agencies, brands and advertising publishers who provide perspective on the development of the business as a whole, as well as revenues for individual companies.

Global Facebook Revenues:

Global revenues at Facebook are expected to grow 64% to $6.1 billion in 2012, up from $3.7 billion in 2011, according to eMarketer. The previous forecast in September 2011 estimated Facebook would earn $4.27 billion in 2011.

However, eMarketer still expects strong performance from Facebook in 2012, especially as the company expands its ad offerings to include “Sponsored Stories” in the News Feed and attempts to lure more big-brand advertising dollars, according to eMarketer principal analyst Debra Aho Williamson.

Much of Facebook’s success in the past has come from performance marketers and small or medium-sized businesses using the company’s self-service ad platform, which eMarketer estimates accounts for as much as 60% of total ad spending on Facebook.

eMarketer estimates the company's worldwide advertising revenues will grow 60.5% to $5.06 billion this year, accounting for 83% of total revenue. By 2014, Facebook is expected to bring in $7.64 billion in ad revenue alone.

Online and Total Ad Market Share:

Google still holds a healthy lead in the overall ad market, thanks to strong mobile, display, and search revenue growth. The company’s share of the $39.5 billion US online advertising market will reach 44.9% in 2012, up from 41% in 2011. As the total US advertising market rises to $169.5 billion in 2012 from $158.9 billion in 2011, eMarketer estimates that approximately one in 10 advertising dollars spent in the US will go to Google.

Facebook earns about 1.1% of all ad dollars spent in the US, eMarketer estimates, and the company still trails Yahoo! in terms of total online ad revenues. The social network, which does not sell search advertising, will see its share of total US online ad revenues grow to 6.5% this year, from 5.4% in 2011. Yahoo’s share will fall to 7.4%, from 9.5% in 2011.

About eMarketer
eMarketer publishes data, analysis and insights on digital marketing, media and commerce. We do this by gathering information from many sources, filtering it, and putting it into perspective. For more than a decade, leading companies have trusted this approach, and have relied on eMarketer to help them make better business decisions.
www.eMarketer.com

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