During the last three months, Facebook saw 40% growth from the year before in display ads delivered by automated technology known as "programmatic," according to a new survey to be released today. Meanwhile, Google, which delivers display ads on YouTube as well as its ad syndication network of some 2 million websites, actually saw a drop of 19%, according to the latest quarterly survey from digital advertising management firm IgnitionOne.
That doesn't mean Google's display revenues overall dropped that much, or even at all. IgnitionOne is focused on big companies such as
This is the second report showing Google losing to Facebook in display ads. Tracking a different metric from its set of advertisers back in July, Adobe found that in the second quarter, the rate of clicks on Facebook ads nearly doubled from a year earlier, while Google click rates rose only 24%. That might have been a side-effect of the impact of changes Google made in April to its search rankings of websites based on whether they look good on mobile devices such as smartphones.
This time, there are at least two other possibilities for Google's display underperformance versus Facebook, says IgnitionOne CEO Will Margiloff. First, it's apparent that Facebook's ability to identify people because they're logged in means it can amass a lot of quite accurate data on their behavior and preferences so advertisers can better target relevant ads to them--not just on Facebook but on many other websites where Facebook syndicates its ads. It can do that better than Google.
But the surge in display ad spending on Facebook also may stem partly from the success of Google's search ads, says Margiloff. The amount of revenue Google gets from each click on a search ad rose 21% in the third quarter. That's much higher than 15% "cost per click" growth in the second quarter and 10% in the first quarter--and far higher than the 3% or less growth during most of 2014.
That's great for Google as far as it goes, because mobile ad prices have long lagged prices of ads viewed on computers. But some advertisers may find the price increases so steep that they're starting to look elsewhere for less costly ad buys. "Marketers may have found some interesting nooks and crannies to reach customers through display ads on Facebook instead," says Margiloff.
Google's search business isn't yet hurting, and search ad revenues actually rose 12% from a year ago, much faster than display ad's 7% rise. So Margiloff says the effect is small at best--but sure to grow if search ad prices keep rising.
Google still has 27% of the market, but that's down from 35% a year ago. Meanwhile, Facebook's share has shot up from 10% to 16%. Overall, the market is up 7% from 2014.
Despite appearances from this quarterly report, Google's display business isn't really falling off a cliff. In particular, YouTube is seen as increasingly attractive to brand advertisers looking beyond television for younger audiences.
What's more, Google has recently added some new weapons to its display arsenal that match Facebook's, such as the ability for advertisers to match customers by their emails to logged-in Google accounts, and also to target others with similar interests on YouTube and Gmail.
"You're going to see a lot of tit-for-tat with these two companies," Margiloff says. Indeed, the two companies each keep grabbing a larger share of the overall online advertising pie. That's not likely to change anytime soon.
