Google, Facebook dominate digital ads market

SAN FRANCISCO • Google and Facebook claimed the largest share of the booming digital advertising market in the United States last year, pulling away from smaller rivals, according to two industry reports released on Thursday.

Online advertising revenue in the US reached a record US$59.6 billion (S$80.4 billion) last year, up 20 per cent from 2014, the Interactive Advertising Bureau said in its annual report on the business.

Google, the leading Internet search provider, and Facebook, the biggest social network operator, claimed 64 per cent of that revenue, according to Pivotal Research analyst Brian Wieser.

Google scooped up US$30 billion and Facebook gathered US$8 billion while smaller companies lost market share, Mr Wieser said.

"Smaller companies will continue to operate in the shadows of the industry's two dominant players," he wrote in a note to investors.

Late on Thursday, Google parent Alphabet reported a 20 per cent jump in first-quarter revenue from its websites, including Google.com and YouTube.

Earnings for Alphabet, before certain items, were US$7.50 a share, the company said in a statement. That was below analysts' average projection of US$7.96, according to data compiled by Bloomberg.

Revenue, excluding payments to distribution partners, rose 18 per cent to US$16.47 billion, just missing analysts' forecasts of US$16.59 billion.

As the company's advertising businesses have expanded, growth has slowed, and the company has sought to make up for that by turning to businesses in its Other Bets division, along with subscriptions and cloud computing services. 

Alphabet chief financial officer Ruth Porat said the company's traditional robust margins in its advertising business will feel the pressure as spending on traffic acquisition is expected to keep rising even as the shift to mobile platforms continues.

Facebook is scheduled to report its results on April 27.

The rest of the industry saw growth in the low double digits in 2015 after a relatively flat 2014, according to Mr Wieser's report.

The growth was driven by niche players such as Pandora Media, LinkedIn and Twitter, offset by weaker older Web players like Yahoo! Inc, the analyst said.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on April 23, 2016, with the headline 'Google, Facebook dominate digital ads market'. Print Edition | Subscribe