It would not be wrong for me to say that most of the people across the globe would have typed Google.com on their browsers, when asked to test if they have a working Internet connection. It is nearly impossible to estimate the impact Google has made on our lives. After Google (NASDAQ:GOOG), if there is an Internet behemoth that has become unimaginably big in a short span of time, it is Facebook (NASDAQ:FB). While the concept of social media actually spread with Orkut, a social platform by Google, Facebook killed it in no time to take the crown.
While Google is the king, Facebook is fast gaining strength!
Currently, Google is the undisputed leader in the online advertising industry with majority market share. The bulk of its revenue comes from search advertising followed by display advertising that includes videos, images and interactive ads. It has also made a strong comeback in social media with Google+, a service similar to Facebook, albeit with amazing new features and enhanced utility.
- Warning! GuruFocus has detected 2 Warning Signs with FB. Click here to check it out.
- FB 15-Year Financial Data
- The intrinsic value of FB
- Peter Lynch Chart of FB
Facebook, which ranks second to Google in terms of share in online advertising, did not enjoy a very successful IPO but achieved robust growth in revenue for the year 2012. Facebook’s revenue comprises of advertising and payments for purchase of goods from platform developers. In 2012, overall revenue increased to $5.09 billion from $3.7 billion in 2011.
While Google strives and grows because of its monopoly in search, Facebook derives power from its gigantic database in social media. Google’s search advertising is still the biggest component of its overall revenues as big advertisers happily spend millions of dollars each year on search.
The idea behind investing such a huge amount in search is that it provides advertisers with an opportunity to target customers very accurately. Marketers have one big motive and that is to get as close to its customers as possible. Companies can leverage the ability of Google’s search engine with canny campaign management, in order to target customers at different stages of the buying cycle.
The arrival of Facebook has changed the rules of this game. It has gone a step forward to provide the privileges of behavioral targeting to marketers. Now, advertisers can astutely market their products in accordance with behavior of people on the website. The advent of business pages, fans and likes have given small and big advertisers the option to specifically target users, who are potential customers. This article very widely elaborates on the effectiveness of Facebook ads.
And Here Comes the Graph Search...
“Release the Kraken,” said Zeus, in the movie Clash of the Titans, unleashing a scary and unbeatable monster that would definitely lead them to victory in the war. While Mr. Mark Zuckerberg is no Zeus, he has definitely unleashed Facebook’s most lethal weapon, Graph Search, which is sure to send out a tremor in the Google fortress.
This new search engine from Facebook will allow users to find answers to queries like “friends who like Twilight” or “people who live in Berlin and like Aerosmith.” For a moment, imagine the database that Facebook would generate from its more than a billion active users and the advantages it would carry for businesses. This video quite precisely points out the massive increase in significance of likes and shares and other engagement tools with Graph Search.
Google Is Dominating the Mobile Ad Space
If Facebook has a lethally innovative product, Google has dominance in the revolutionary mobile ad space. As this e-marketer article highlights, Google took away more than half of the $8.8 billion spent in mobile advertising last year. Each passing day is seeing more and more people shifting to a smartphone, as manufacturers are successfully introducing amazing features at reasonable prices. As per data, approximately 56% of American adults now possess smartphones, which gives extensive targeting options to marketers. Google commands a major share in both search and display formats as well as mobile apps.
It is a big challenge to deliver similar metrics with mobile advertising in terms of clicks, CTR, etc., but Google seems to be carrying on reasonably well. While, Facebook’s mobile app is pretty clumsy because the company has just taken the webpage from big screen and somehow tried to compress it in the app, its App Center has a good number of engaging apps and games. Google’s move to acquire Admob, a mobile advertising platform, in 2010 has paid off handsomely, creating a win-win situation for app developers, advertisers and the company itself.
Apple Is Trying to Get Better
In comparison, Apple (NASDAQ:AAPL)'s iAd platform that directly competes with Admob had quite a rocky start in 2010. iAd has been a lackluster product from the company that is famed for building great products. Recently, the company lowered the minimum buy-in price to $50 from $1 million that was announced in 2010. This will encourage small-scale developers to promote their apps using iAd as previously, such high price cut-off a lot of developers. I believe Apple has finally realized the fact that mobile advertising is quite a bit more complicated than desktop advertising, and companies are still wary of putting big money in it. If it wants to garner good response, it should focus on small guys who can put in some money and test the platform.
Final Words: The Battle Has Just Begun
A few years back, Google was the go-to name for online advertising because it offered great value. Though things have not changed with Google, a lot of things have changed in the industry with the coming of Facebook and other smaller but valuable ad platform providers. Mobile and social will be the drivers of growth and value down the line. Facebook’s launch of Graph Search has already sparked a fierce battle between the two behemoths.
My short stint in the digital advertising world has exposed me to the unprecedented power of social media and the love for it among advertisers. This also explains Google’s extreme efforts in establish Google+ at parallel with Facebook in social media.
In my view, it is a good time to invest in Facebook because it has a massive growth opportunity ahead. This, however, does not mean that Google is an unworthy investment. Actually, the battle is just starting now with both the sides having valuable and unique propositions.