Why Google continues to dominate the online advertising market
Google leads the worldwide online advertising market with more than 30% share
Google (GOOG)(GOOGL) remains the undisputed leader of the global online advertising market. It offers a number of products that have helped it maintain its leadership. Some of these main products are Google Search (a search engine), Adwords (an auction-based advertising program), DoubleClick (infrastructure for serving ads), YouTube (a video platform), and Android (a mobile operating system). These products have helped Google maintain above 30% share in the worldwide digital advertising market, according to eMarketer.
As the chart below shows, although Google has maintained its market share, Facebook (FB) has shown the strongest growth in the last three years, with its share expected to increase from 4.1% in 2012 to 7.8% in 2014. Interestingly, the report suggests that Microsoft (MSFT) will overtake Yahoo (YHOO) in this market this year.
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Analyzing growth areas for Google
Google is mainly an Internet company that sells online advertising. Online advertising contributed 90% to Google’s total revenues in 2Q14, according to its filings. The search advertising business continues to be the cash cow for Google, as it contributes more than 80% to Google’s total ad revenues, according to eMarketer. According to the same report, mobile search’s contribution towards Google’s total ad revenues would increase from 19.4% in 2013 to 26.7% by the end of this year.
More importantly, the report mentions that the desktop search advertising market should decline by an approximate year-over-year rate of 10% this year but that this decline should be more than offset by 82% growth in the mobile search market.
YouTube is another growth area for Google that’s also benefiting from video advertising market growth. According to eMarketer, YouTube contributes more than 20% to the overall video advertising market in the U.S. Although Google doesn’t report YouTube revenues separately, eMarketer estimates YouTube revenues to have been ~$2 billion in 2013. YouTube’s contribution towards Google’s net ad revenues has increased from 2.2% in 2011 to 5.1% in 2013, according to the report.