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Google Gains Ground in Net US Digital Ad Revenue Share
Posted by: EmmanuelM (IP Logged)
Date: September 16, 2013 01:55PM

Despite the entry of Facebook (FB) in digital advertising, Google (GOOG) not only maintained its dominance in the market, but it further solidified its commanding market position by improving its net U.S. digital ad market share. However, its mobile Internet ad revenue share continues to slide since Facebook joined the bandwagon back in 2012. Despite that, Google is still a dominant leader in both net U.S. digital advertising and mobile Internet advertising.

Net U.S. Mobile Internet Ad Revenue Share and Outlook

In the U.S. mobile Internet ad market, Google and Facebook are the dominant players. Google is a major player in this field, enjoying the biggest share. Based on estimates, Google is expected to grab about 48.2% share of the net U.S. mobile Internet advertising revenue this year. This is down approximately 8% from last year's share of 52.5%.

In 2011, Google enjoyed a higher share of 57% when Facebook was not yet in the competitive landscape. Clearly, Facebook took a bite of Google's share, and the bite is getting bigger. However, with the current growth and innovations of Google, eMarketer estimates that Google will rebound to 49.2% in 2014 and further improve to 50.6% in 2015.

Facebook entered the U.S. mobile Internet ad market in 2012, and the leading social network immediately grabbed a bigger hold of the market at 9.4%. This is higher than the market share of Yahoo (YHOO) at only 6.1%. Yahoo slid from 7.1% share in 2011, even under the leadership of a new CEO – Marissa Mayer.

So, it's obvious that Facebook also took a toll on Yahoo's share. For this year, Yahoo is expected to dive even deeper and end the year with only 4.6% share, while Facebook will soar again with a remarkably higher U.S. mobile Internet ad revenue share over last year at 15.3%.

Net US Digital Ad Revenue Share Performance and Outlook

In a bigger field, the scenario is different. Google's net U.S. digital ad revenue share is improving year-over-year, and it is estimated to maintain its growth toward 2015. In this market, mobile ad is just a component of the entire Internet advertising industry that also includes ads displayed in desktop PCs and laptops.

Google remains the dominant leader in 2012 with 40.9% share, which is slightly higher than its share in 2011 at 40.1%. For this year, it is expected to improve to 41.1%. Further growth is expected in 2014 at 42.2%, and in 2015 at 44%.

The second major player, in this case, is no longer Facebook but Yahoo at 8.6% at the end of the year 2012. However, this is down from 9.6% share in 2011. For this year and in the ensuing years, Yahoo is expected to slide further to 7.7%, 7.1%, and 6.6% in 2013, 2014, and 2015, respectively.

Facebook is already in the industry since 2011 with 5.4% share. It slightly improved its share in 2012 at 5.9%. For this year, a remarkable jump is projected at 7.1%. But growth is seen to slow down in 2014 and 2015 at 7.7% and 8.3%, respectively.

Latest Financial Results

The increasing revenue share of Google in U.S. digital advertising pushed its revenue higher. During the second quarter of 2013, Google reported improved consolidated revenue that saw 19% growth over the same period of last year. According to Google's CEO, Larry Page, it was a great quarter with more than $14 billion dollars in revenue. Google's GAAP net income also jumped 15.77% from $2.79 billion in second quarter 2012 to $3.23 billion. However, non-GAAP net income slightly declined from $3.36 billion to $3.23 billion.

At the end of the quarter, Google has cash, cash equivalents and marketable securities of $54.4 billion, while its free cash flow was $3.09 billion. The management plans to continue to make significant capital expenditure for the rest of the year to sustain its growth.

Stocks Overview

In the stock market, Google is outperformed by Facebook in terms of year-to-date growth. For this year, Google jumped only 17% at the end of August. Facebook, on the other hand, grew 47.46% year-to-date. But despite the slower growth compared to its major competitor, Google remains a profitable investment.

Facebook's IPO investors just hit the profitable mark for the first time in August since its IPO. In other words, Facebook is just bouncing back from a major plunge, while Google steadily grows for the past four years.

Summary

Internet advertising is just one of the revenue drivers of Google, yet it is a significant signal that can cause shares to either jump or slump. It is important to regularly check Google's Internet ads revenue share against its previous performance and against its close competitors. This can help investors in their investing decisions on whether to secure a position or to take profits.


Stocks Discussed: FB, GOOG, YHOO,
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