It’s no wonder, then, the two digital behemoths, Google and Facebook, both made it through 2020 relatively unscathed. That doesn’t mean they fared equally well, though.
Google’s performance was solid, but its reliance on search meant it struggled and saw only marginal gains in 2020. Growth in net advertising revenues was actually a big win for the company, though they rose by just 4.4% to £6.38 billion ($8.18 billion). Pre-pandemic, we had predicted revenue growth of 10.1%, but in our interim August 2020 forecast, we estimated that the tech giant’s ad revenues would actually drop in 2020, by 2.8%.
That Google was able to do so much better than predicted was largely due to YouTube. Display ad revenues accounted for 19.1% of Google’s total ad revenues in 2020—our pre-pandemic estimate was 17.6%—and YouTube’s 56.1% contribution to that figure was nearly 3 percentage points higher than our March 2020 estimation.
Meanwhile, Facebook benefited greatly from the clamor for display (and video) inventory. Its digital ad revenues were £4.55 billion ($5.83 billion) in 2020, up 19.6% YoY, which was faster than our pre-pandemic estimate (19.2%).
Facebook will continue to gain on Google through the end of our forecast period in 2023, as Google’s share of total digital ad revenues remains flat—barely shifting from 38.7% to 38.5%—and Facebook’s grows—from 27.6% last year to 30.0% in 2023.
Such growth might have influenced Facebook’s new Instagram strategy, which concentrates heavily on digital video. Instagram now offers five separate places users and marketers can incorporate video: the feed, Stories, Live, Reels, and IGTV (recently launched in the UK). While there’s little differentiation among the products, the strategy appears to have paid dividends for Instagram: The platform’s ad spending rose by 45.1% in 2020 to £1.98 billion ($2.54 billion), growing slightly slower than our pre-pandemic estimate of 47.9%.