Over the past decade, Google has consistently controlled the digital marketing space. The company has maintained a market share that is orders of magnitude larger than any of its competitors. There’s Google and then there’s everyone else. However, that might not be the case for much longer.
Google vs Facebook
While it’s not immediately apparent, there are signs that the demand for Google’s ads is slowing. The average cost-per-click (CPC) on Google-owned websites has decreased by 15% over the past year. According to BI Intelligence, Google’s ad sales growth has also been declining steadily over the past few years.
Meanwhile, Facebook has continued to chip away at Google’s market share with its tremendous expansion into mobile advertising, which has increased by 81% year-over-year and now accounts for 73% of Facebook’s ad revenue. This is quite the turnaround from just a few years ago when Facebook’s ability to monetize mobile ads was widely questioned. And while Google’s average CPC has continued to decline, Facebook’s average ad price has increased by 285% over the past year, indicating strong growth in demand.
Mobile isn’t the only area where Facebook has seen tremendous growth. Just last month, Facebook hit a new milestone of 4 billion daily video views. To put this into perspective, Facebook videos received 3 billion daily views in January and just 1 billion daily views in August of last year. Users are starting to upload their videos directly to Facebook rather than YouTube, which doesn’t bode well for Google.
The Ultimate Ad Exchange?
Despite all of this recent success, Facebook’s gains in mobile and video aren’t what Google should fear most. A patent Facebook filed last month details what looks to be a mega ad exchange that would allow advertisers to harness Facebook’s unrivaled user data to target ads across publisher websites. The exchange would allow advertisers to run both traditional ads as well as native content (such as videos, news articles, and app downloads) on websites outside of Facebook. Advertisers would be able to combine their own data with data from Facebook’s social graph to match their ads to specific user profiles – for example, a man in his mid-30s who recently purchased hiking boots and reads travel articles.
The impact of such an ad exchange on the digital marketing landscape could be far-reaching. Giving advertisers the ability to harness Facebook’s social graph data would allow them to target ads based on who consumers are and what they like rather than just their browsing history. This would have the potential to draw publishers away from products like DoubleClick, AdSense, and Taboola.
As it stands, Google still controls 31% of digital ad revenue compared to Facebook’s 8%. However, if Facebook is able to provide a compelling, one-stop shop ecosystem for advertisers, it has the potential to challenge Google for dominance in the digital marketing space.