Facebook Takes A Bite Out of Google

2012 2013 2014 20150.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

52.60%49.30%

46.80%

0.403

5.40%

17.50%

21.70%

0.3009

Mobile Ad Revenue Share: Google vs Facebook

Google

Facebook

In 2009 Google purchased the market leader Admob for $750m. Since then mobile has grown phenomenally and now occupies more than 51% of digital time. A lot has changed!

Ad-networks such as Admob sell impressions on behalf of publishers and add value by employing sales teams, creative & rich-media ad-formats, and more recently by enabling programmatic bidding. Unfortunately this approach has not been that successful for either advertisers or publishers. Advertisers complain about a high cost per install due to low conversion rates and publishers complain about low CPMs. It appears the root cause of the problem is the inability to effectively target due to a lack of third party cookie support ie data!

Facebook with their treasure chest of first party data may have a solution to this problem. In 2012 Facebook launched app install ads and took the market by storm, driving high quality downloads at affordable CPIs. To continue supply growth Facebook is aggressively rolling out its partner network. This enables advertisers to buy ads using Facebook’s first party data but on third party inventory. To date, advertiser performance has been good & publisher CPMs are high. It therefore appears that Facebook’s primary added value is as a rich audience data layer, enabling advertisers to reach their target consumers accurately & at scale.

What is the consequence for Google Admob & traditional networks?

If Facebook can successfully port its newsfeed advertisers to its third party network and continue to command premium CPMs then over the medium-long term it will start to attract a significant

audience share & publishers away from rival ad-networks. The decision for publishers will be simple if Facebook can offer $5+ CPM vs a mobile market average of $0.50 - $1.00.

At the current trajectory Admob is losing 5% share of ad-spend a year and Facebook is gaining 25%+ then it won’t be long before Facebook’s network dwarfs Admob’s.

Although Google talks about rolling out updates to Admob, its changes are synthetic, support for third party tracking providers is limited, and Adwords can’t even target specific mobile devices!