Marcus Johnson (00:04):

Hey, gang, it's Friday, April 24th. Zach, Drew, and listeners, welcome to Behind the Numbers: an EMARKETER Podcast. I'm Marcus and join me for today's conversation. We have two senior forecasting analysts. One of them lives in Utah called Zach Goldner.

Zach Goldner (00:17):

Hey, Marcus.

Marcus Johnson (00:18):

Hello there. We're also... Wow. So intense. "Hi, Marcus."

Zach Goldner (00:26):

I also like to do a little bit of a exaggerated hand motion. All right, let's roll it back.

Marcus Johnson (00:32):

No, we're keeping it. No, we're keeping that in.

Zach Goldner (00:33):

Keep it going.

Marcus Johnson (00:36):

Ladies and gentlemen, Zach Goldner.

Zach Goldner (00:38):

Hey, Marcus.

Marcus Johnson (00:40):

That was too subdued. Can I get normal? Forget it. It's too late. We're also got one of them-

Zach Goldner (00:44):

Cut. Director's cut.

Marcus Johnson (00:44):

Living in-

Zach Goldner (00:47):

Wow. I'm really failing early.

Marcus Johnson (00:49):

Yep. Drew Spink. Hello.

Drew Spink (00:51):

Hey, Marcus. Hey, Zach.

Marcus Johnson (00:53):

That was much much-

Drew Spink (00:53):

[inaudible 00:00:54] podcast.

Marcus Johnson (00:54):

Thank God you're here. Anyway, today's fact. How the microwave was accidentally invented. Okay. So I've started... Trolling's the wrong word. I just feel like there's a lot of things that were discovered or invented that we give too much credit for. Here's one for you. The American engineer... I talked about the penicillin before. American engineer Percy Spencer accidentally invented the microwave when he noticed a chocolate bar melting in his pocket whilst working with a magnetron, generates powerful microwaves for radar systems. This observation led him to realize that microwaves themselves were heating the food. It's cool, but I just think maybe he gets too much credit.

Drew Spink (01:44):

So he's also heating his body at the same time.

Marcus Johnson (01:48):

Exactly.

Drew Spink (01:48):

Not a doctor, but that doesn't sound super good either.

Marcus Johnson (01:51):

Thank you. Drew gets it. Zach?

Zach Goldner (01:54):

Wasn't even edible food there. You're not going to eat your melted chocolate in your pocket. That just seems like a disaster. Destroy the microwave.

Drew Spink (02:02):

Throw the pants away. It's a mess.

Marcus Johnson (02:05):

Good God. Anarchist it really quick. Destroy the... Yeah, between this, Alexander Fleming accidentally discovered penicillin when he left a Petri dish uncovered, Newton and the apple, I'm just saying we've discovered a lot of things by chance. That's all. Does he deserve credit? According to these guys, no. Trash it all.

(02:26):

Today's real topic, Meta is overtaking Google in digital advertising. What does it all mean? Okay. So on April 13th, Suzanne Veranica. She wrote, she's at the Wall Street Journal, "The Meta platforms is expected to surpass Alphabet's Google to become the world's leading digital advertising business a first for the social media company." She explains that ad research firm EMARKETER, that's us. More specifically, you guys. Projects that Meta will surpass Google in net ad revenue this year. We'll explain in a minute. 2026, reaching over $243 billion edging past Google's $239 billion worldwide, if I haven't mentioned that already. We should note that our estimates ... Well, I'll let them note how it all works. We'll start with Zach because he worked on Meta specifically. First of all, Zach, explain what we mean by net and then we'll get into what's driving Meta.

Zach Goldner (03:27):

Yeah. So happy to explain the difference here between gross and net. Well, Meta reports almost entirely net, which means they own their own ad inventory, while Google has more of a mix. Some of its ad inventory like its search is net. While other parts of its business like YouTube include a lot of TAC or it's also called traffic acquisition costs where Google pays out its partners and only keeps a portion of that ad revenue. So by us using net, it does avoid overstating Google of what they bring in relative to that of Meta. So gross revenue would capture the full advertiser spend before the payouts to creators and partners, which does reflect the market activity. But when we look at net ad revenues, it helps better compare apples to apples so we can compare each company and what revenue they're actually bringing in that goes down to the bottom line.

Marcus Johnson (04:25):

Yeah. Interesting.

Drew Spink (04:27):

Yeah. And so a good example of that too is that one of Google's largest tax payouts is to Apple. Every year they pay roughly $20 billion just for access for Google to be the default search engine on all of their devices. They have similar payments towards, I think, like Firefox and Mozilla, same type of access to just be default. Search engine traffic. So like Zach said, the dollars are still flowing to Google. They just have to pay other device manufacturers to help get the traffic in the first place. Whereas Meta, all of it's contained within its own ecosystem already and they don't have to pay out anybody else. They're just advertising to their own users directly.

Marcus Johnson (05:08):

Okay. So Zach, what's driving Meta to overtake Google in worldwide ad revenues this year?

Zach Goldner (05:14):

Meta has been on a role for the last two years. I believe it's now been seven quarters in a row where they've beaten out their own internal guidance or their expectations of what their revenue will be for that quarter. So they're now at at least seven consecutive quarters where they're even beating out their own expectations. A big reason for that is artificial intelligence. Meta's growth had been particularly becoming from its main platforms, Instagram and Facebook. It's been able to optimize its feed, sharpen targeting, and squeezing more monetization formats like reels. We've even seen their ad impressions growing by double-digit year over year. And even as that happens, the pricing of those ads has been increasing at the same point. So that's telling you two things. They're delivering more ads and advertisers are willing to pay more for them. A lot of that, again, is driven by AI. There's better targeting, better ranking, and better creative tools for the advertisers themselves that's improving the ad performance.

(06:22):

So that's one main driver of what's happening for Meta. But as we are moving into 2026, this is going to be the first year where we see a ramp up of advertising spending on Meta's other platforms like that of Threads and WhatsApp, which is not a social network company or platform, but instead of a messaging platform. And if we were to look at the audience space of both of those platforms, Threads has over 400 million global users while WhatsApp has a staggering three plus billion monthly active users.

Marcus Johnson (07:01):

Yeah. Talk about Sleeping Giant. Probably not been paying them enough attention knowing that they turned the taps on there, it's going to be a significant revenue stream. Drew, what about for you? Anything else driving Meta here?

Drew Spink (07:10):

I was just going to say that their biggest structural advantage going forward is that they've spent the last decade acquiring almost every person on the entire planet to use their apps between Instagram, Facebook, WhatsApp, and now Threads. So they can advertise everywhere in the world to basically everybody from every demographic and age group, from child to elderly adults. Everybody is contained within their matrix now.

Marcus Johnson (07:39):

Yeah. Yeah. It's a shocking number of people that are in their daily, the family of active people, which is all the platforms that Drew mentioned. I think it's when you look at internet users as a share of internet users, it's close to three quarters of people on the planet use a Meta platform.

Zach Goldner (07:58):

And Marcus, soon it's not just going to be your family, not your grandma, but they're going to have artificial profiles that are coming to the platform as well. So once you've already maxed out the total amount of heads that are on the planet, they're going to bring in some new artificial ones to help boost up engagement. So another trend to go look out for in the coming years.

Drew Spink (08:18):

And they won't have to pay out to creators anymore. They can just pay their own AI creators for the exact same type of content. Very dystopian.

Marcus Johnson (08:26):

Yeah. Yeah.

Drew Spink (08:28):

Not cool. Not cool, Meta.

Marcus Johnson (08:28):

We run out of humans we can do space exploration, so we can find new people. No, we'll just make more here. I really liked your... You had a few points in the analysis, and I mean, we've already focused on the AI piece of it, just breaching of Reuters, noting Meta's advantage plus automated ad suite has been gaining strong advertiser adoption due to its ability to streamline campaign set up and enhanced return on marketing spend. AI is changing how some advertisers create the ads that run across Meta's own science with Meta saying the revenue run rate of video generation tools hitting $10 billion in Q4 2025. And Meta is saying Reels on track to make 50 billion over the next 12 months, so as I noted in a Journal article.

(09:14):

So lots of good things happening for them. You have a great analysis of this forecast. Drew, I think you wrote this one and it says, "These are compounding structural improvements to the advertising stack, not one-time tailwinds. Practical result for advertisers is a platform where AI is systematically improving the return on every dollar spent quarter on quarter across an audits of over three billion daily active users."

(09:36):

So it is overtaking or expect Meta to overtake Google and net ad revenues this year. What happens in the next year or two? Is it that it's just squeaked past them and it's going to be a battle back and forth over the next couple of years, Drew, or are we expecting Meta to run away with the lead?

Drew Spink (09:57):

No, this is a squeak past, again, in terms of net, but Meta's just growing so much faster because they're finally turning on the taps versus Google who's had the taps on for 15 plus years at this point. So Google's structural advantage is still huge, and they're still the largest player in the whole ad ecosystem when we take into account all of their gross revenue. It's just that Meta's holding onto all of it to their own sheet, and that's just going to continue to happen and grow as they turn the taps.

Marcus Johnson (10:32):

So we've talked about what Meta's been doing. Is this more a story, Drew, of Meta overtaking... What Meta's doing, this overtaking story, is it more of a story of what Meta is doing or what Google isn't?

Drew Spink (10:47):

I think that it can be a little bit of both. I think Google isn't... They're not sitting by and letting any of this happen. For example, this past year, they beat on their search expectations for every single time that we forecasted, they beat again and again. And a lot of that is just due to their own AI integrations that they've added to their own ad stack and to their own platforms to increase their own efficiency. And they've also been the first company to integrate the AI overviews, as well as their own AI mode and roll out their own chatbot in Gemini, all spaces that they can monetize on their own. The biggest challenge that they are facing is just through chatbots like ChatGPT of people searching there instead of searching on Google. That's their biggest structural risk. And they're not monetizing yet, but Google is doing everything in their power to make sure that nobody chooses to do that in the first place.

(11:43):

And part of their AI overview rollout has been very cool for the user, but it's led to some issues with publishers where there's been many examples of people that have seen roughly 50% drops in organic traffics that are going to their site because now users aren't leaving that AI overview. And additionally, a lot of the links that get surfaced aren't true ads. The ads that are being placed in there, you can still see the sponsored product banner that's listed. Sometimes it's in the AI mode, sometimes it's in the AI overview, sometimes it's next to it, sometimes it's in a traditional product page. So these ads are kind of flying all over the place and the advertisers aren't really sure where their placement's going. So we're actually on this update right now. We're working on a new AI advertising forecast to try and differentiate where some of these placements are going, and that we can also start tracking advertising to the chatbots when those are being rolled out.

(12:41):

But additionally, another risk that they're dealing with, it's mostly through retail media eating up some of their own search adventory. So most of that's coming from Amazon. Their threat to Google is on their commercial queries. So product searches, price comparisons, brand discovery. Amazon's built up their platform to be so large now that they can take all of that consumer shopping journey away from Google. People don't need to go straight to it. They can buy everything they need to just in Amazon. And Amazon integrating their own AI and their own chatbot there is making that process even better. So Google's offering is still incredible and it's still kind of the gold standard. They are still the king in terms of the internet and how this is all offering. It's just that there's structural risk in a couple different places that they're trying to balance at the same time. And now with companies like Meta, just having all of these social video offerings that have equally or better offerings in terms of return than a traditional search ad, which has been the standard, there's just erosion from every single angle.

Marcus Johnson (13:54):

Zach, what jumps out to you the most about this? There's a lot here in terms of Google and what they're trying to do to stay ahead or to keep in front even in this instance. But there's also a lot of pressures, as we've talked about from Meta, from Amazon, from OpenAI, from TikTok in terms of how people are searching differently. What jumps out to you the most about Google's story at this point?

Zach Goldner (14:15):

The big number to me is 50%. These companies combined can be considered a duopoly in the advertising space. They make up just under 50% of the total digital ad pie, which is pretty absurd. That's a US focus number. But so for all the talks about disruption, about other players coming in, these players are still the biggest and they're getting bigger. But there's one thing I want to put on people's radar, and that's been more or less so the recent legislative discussion. One of the more under the radar risks to both Meta and Google is their core product design, which has come under fire recently in court cases, especially the one that recently happened where Meta and YouTube are both found liable over addictive design, things like the infinite scroll, autoplay, algorithmic feeds.

(15:10):

That's a really big deal because that is what both YouTube and what Instagram and Facebook are known for. And that's how they drive more engagement is through infinite scrolling. So that ties directly into advertisements. If those platforms do have to redevelop their platforms, that could see a real risk to their advertising control.

Marcus Johnson (15:34):

I was wondering about this because we were talking about the worldwide, but in the US, you were saying to me before the recording, it's a similar trend. So we're seeing this overtaking reflected in the US level as well. In 2026, Meta projected to surpass Google as the largest US digital player for the first time, Google 95 billion, Meta over a hundred. And you say it reflects a genuine shift in what advertiser's confidence is concentrating and why. But I was wondering, could this flip again because of the social media addiction trials and will that lead to systematic changes for the social platforms? Drew, any thoughts on that part?

Drew Spink (16:13):

Probably not. I think by the time this all plays out and gets said and done, nothing's really going to change. And this only does affect kids, so there's still a massive market for doom scrolling to the adults, which I did just recently see a survey that was talking about how people's Zach and I's age are getting more concerned about their parents that are starting to doom scroll and just getting fed propaganda from all angles and they can't figure out what's going on in the real world anymore. They can maybe just switch from kids and go after older people.

Marcus Johnson (16:48):

Yeah. Well, Pew Research had that study where they looked at how saying parents are concerned about their kids' time spent on social media, but even more than that, kids were concerned about their parents' time on social media. So it's a really good point. Another article, I forget what publication, but it was basically saying that where are people spending... What are people doing after they retire and they're going to hang out on social media. So it is absolutely an issue for older folks as well. But to your point, a lot of the focus, the emphasis, particularly social media addiction trials has been around kids, at least so far. We'll see.

(17:21):

Zach, you mentioned the 50% number. I thought you were going to say Google's share of US search ad market expected to be 48.5 the first time it's fallen below 50% in the past 10 years. So I thought that was the number you were going for, but an equally interesting one in terms of the duopoly and just how much they control.

Zach Goldner (17:40):

Yeah. And when we take a look at their share of advertising, the same can be looked at from the perspective of time being spent. We kind of mentioned our parents and everyone being addicted to these platforms. Well, you take a look and there's an old saying that time is money. If that's true, both Meta and YouTube, pretty much the central banks at this point, the ad ecosystem revolves around them. So when we look at Meta, which here I'm just including in Facebook and Instagram, across the entire population, people are going to be spending 41 minutes a day. That's 42% of the time on social networks. And then for YouTube, that's roughly around the same mark, just a little bit higher than that of Meta properties. So time spent on these platforms is huge, and both Meta and Google know how sell and deliver ads. So the more time that people are spending with these platforms, the more ads that they can spend.

(18:37):

If we were to compare Meta to some other platforms, Meta brings in $1.38 from Instagram and Facebook per hour spent per person on its platform. If were to compare that to another social network like TikTok, for example, TikTok brings in just 63 cents. So to put that in perspective, that means on a time spent basis, Meta is monetizing and more than double the rate of that of TikTok. Its ad ecosystem is already really well-developed, built out, and that's how both Meta and YouTube are really being able to reign in the ad dollars across.

Marcus Johnson (19:18):

Talked a lot about Meta and Google and the duopoly, but a part of the conversation, a big part of it for the last, I don't know, seems like a decade or so has been Amazon and they're growing share in this space and the triopoly. Drew, how far behind Google is Amazon and is Google in any danger at all of being overtaken by Amazon anytime soon?

Drew Spink (19:39):

Pretty far behind still. So at least in terms of US, Amazon, they're projected to be about 56 billion this year. Google will be at 95 billion. And on the worldwide, that level's even bigger. So Amazon will be 82 billion, Google will be at 240 billion this year, so less than a third on the worldwide stage. Amazon is competing against Google with some things, kind of like their commercial queries, product searches, price comparisons, brand discovery, stuff like that that I've mentioned. And they're also competing now directly with YouTube through their Amazon Prime offering as well as in activating their own DSP. So they're really the only company that's launching a user product search data that can get launched into a Netflix ad or a Spotify ad for example.

(20:29):

But they also have a full slate of sports that they're rolling out into their own OTT platform in Amazon Prime. And so I think that I remember seeing something that they're the largest investor in global sports rights at the moment. So they'll be able to show Thursday night football, NBA games, the WNBA, soccer, NASCAR, the Masters.

Marcus Johnson (20:52):

Wow.

Drew Spink (20:53):

So they have pretty much a full slate-

Marcus Johnson (20:56):

Quite a collection.

Drew Spink (20:57):

... of content that they're developing and they have their own ad stack that they're continuing to integrate. They're also the first OTT/CTV platform that if anybody has seen these placements yet, there will be commercials in the middle of Thursday night football that will be for chips that you can buy directly and ship to your house just by clicking yes on your remote, which is pretty cool. And through their own AI integrations into the platform, they'll see what you're watching and how you're purchasing, and they'll target you on an individual basis, which could be a little scary. If you're comparing that to how a linear traditional TV ad might work, it's a little bit more personalized, but it's also cool and it will help... Their conversion rates through these type of ad placements will be even higher since they are kind of merging upper funnel and bottom of the funnel at the exact same time.

Marcus Johnson (21:47):

Yeah. Shout out to Andrew Lipsman, former analyst here. He saw this coming a mile away when a lot of other folks, myself included, didn't, and all the pieces they've been putting together for a long time. And then once you press go, just how this all works is really astonishing. They are quite far behind Google to Drew's point, but they are catching up at quite at extraordinary pace. I was looking at some of the numbers US ad revenue projected. Just under 50 billion 2025, but growing to 75 billion by 2028. Put another way in 2025, so last year, Amazon's US ad business was about half 50% the size of Google's. By 2028, it will be 70% as big. So nowhere near overtaking, close to overtaking, but Amazon wasn't part of the conversation of the two big players or the big players in digital advertising a short while ago and now starting to really catch up with or get relatively close to at least eyeshot? Eyesight?

Drew Spink (22:53):

They're in the conversation for sure.

Marcus Johnson (22:54):

They can see Google, is what I'm trying to say, in front of them.

Drew Spink (22:57):

And especially comparing the triopoly as a whole to every other part of the market, it's those three and everybody else.

Marcus Johnson (23:04):

And they're growing share, correct?

Drew Spink (23:07):

Yep. Google's losing share, but Meta and Amazon are both growing. Both of those platforms have been growing at over 20% a year for the last couple years now. And it's just continuing to move at that pace to the point that honestly astonishes Zach and I, that how is it still increasing in momentum? And it is.

Marcus Johnson (23:31):

Zach, any thoughts on the triopoly still somehow growing share and what that means for, I'll call them the others, the TikToks of the world, the Pinterests, the Microsoft, all the other digital ad players in the US?

Zach Goldner (23:45):

Yeah, I think the big word here is data. These three companies control some of the most data in the world. And with that, they're going to continue to sell the best personalized ads, know their consumer the best. And, sure, you're going to have companies like TikTok and Reddit really get into the space, but even as they're doubling up their ads over years and really having tremendous growth themselves, they're still just such a small piece of the pie. So even as they increase up engagement, even if time spent on TikTok rivals out of Instagram, you're going to have the ads that are being delivered on Instagram be much more at premium versus these other platforms. So they're really able to control the market in those sense.

Marcus Johnson (24:33):

Yeah. I want to end with this quote because I think it's brilliant, Drew. It's from yourself, your analysis of the forecast and it says, "The most important..." I think it's a great summary of what's going on here. So, "The most important sentence in this forecast you say may be the simplest. By 2026, Meta will be a larger net US digital advertising platform than Google. That's never been true before. It reflects a decade of compounding investment in AI, social engagement, and creative tools that are now translating into advertising economics that rival and in some dimensions exceed what search has historically delivered. Google is not in retreat. Amazon is not slowing, but the map of US digital advertising is redrawing itself around a new center of gravity and this forecast now reflects that shift," which I think is a perfect way to put it.

(25:15):

Anu Adegbola of Search Engine Land also writing "Meta passing Google in ad revenue would mark more than a symbolic milestone. It reflects a broader power shift towards platforms that make advertising easier to automate, measure, and scale." Close quote.

(25:32):

That's all we've got time for today's episode. Thank you so much to both my guests for joining me, explaining what's going on here. Thank you first to Zach.

Zach Goldner (25:38):

Appreciate it, Marcus. Have a good one.

Marcus Johnson (25:40):

And to Drew.

Drew Spink (25:41):

Yeah, thanks everybody. Having fun as always.

Marcus Johnson (25:43):

Thank you, gents. Thank you to the production crew. In this instance, it's just Lance. God knows where everyone else went. And to everyone for listening in to Behind the Numbers: an EMARKETER Podcast, thank you to you. Subscribe, follow, leave a rating and a cheeky review if you have time. We're back on Monday. Until then happiest of weekends.

(26:01):

Well, we're going to keep the microwave, right? I don't think get rid of the microwave is the solution here, gentlemen.

Drew Spink (26:06):

I like my microwave. It's not going anywhere.

Marcus Johnson (26:08):

I use it for most things I eat. I use it for everything I eat.

Drew Spink (26:12):

Do you use it to make tea or warm things up or do you have kettle for that?

Marcus Johnson (26:16):

Oh, I do. Well, coffee, I put so much half-and-half in it, by the time I'm done with it, it needs to go in the microwave, which is tragic. Yeah.

Zach Goldner (26:25):

It's not how you want to do it.

Drew Spink (26:26):

I just know some Brits are horrified by the idea of microwaving tea.

Marcus Johnson (26:31):

Oh, really? Are we?

Drew Spink (26:33):

I think you're the only one to speak on that.

Marcus Johnson (26:36):

Yeah. Don't listen to them. English people-

Drew Spink (26:38):

Okay, I won't.

Marcus Johnson (26:38):

... don't know what they're on about. Anyways. Now that we've insulted Mr. Spencer and the English...