The order of things–Google pulls away from Facebook

By September 20, 2012Uncategorized

Net US Digital Display Ad Revenue Share at Major Digital Ad-Selling Companies, 2010-2014 (% of total digital display ad revenues) Net US Digital Display Ad Revenues at Major Digital Ad-Selling Companies, 2010-2014 (billions)

As you can see from the tables above, eMarketer is predicting that Google will be bigger than Facebook in display advertising this year, and grow faster going forward. This is a reversal from 2011 when Facebook was in the ascendancy, having overtaken Google and Yahoo for the first time to become the market leader.

Google’s success comes from growth in Youtube and the advertising they sell on third party websites, including mobile. Facebook’s display ad business is growing, but more slowly than before as they are reaching saturation point in their core markets.

None of this means mean that Facebook isn’t an amazing company, it is. Zuckerberg and co. have transformed our lives in a way that few others have, arguably including Google. However, this data does tell us that in terms of impact on the advertising ecosystem Facebook is not in the same league as Google. Display advertising is everything for Facebook and only 10-15% of Google’s business, and yet Google is still beating them hands down. The markets know this and have priced their shares accordingly. At $237bn Google’s market cap is 4.7x Facebook’s $50bn valuation.

Apple and Amazon are the two companies playing in the same league as Google, but assessing which of them has more momentum is difficult because they have radically different mixes of business. Looking again at market caps, Apple leads the three at $658bn, Google is second with its $237bn, and Amazon holds the third slot with $118bn. Interestingly all three of these have had a bumpy ride with Wall Street due to management focusing almost exclusively on the long term, but for what it’s worth Apple has the best share price performance over the last twelve months (up 70%), Google is second (up 35%) and Amazon is, once again, third (up 12%).