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What’s Next for Alphabet in the Advertising Industry?

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Industry with low barriers to entry

Bearing in mind that Alphabet (GOOGL) relies on the advertising industry (QQQ) (XLK) for the majority of its revenues, it’s important to ask what is lying ahead for the company. The online advertising sector is attracting more players because of the low barriers to entry and the perception that the industry is lucrative. 

Alphabet’s Google and Facebook (FB) are two prominent successes in this space. Is this market large enough to accommodate several winners?

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Online advertising market projections

Although researchers are divided on their estimates of the size of the global advertising industry, they are united in projecting growth for the industry. According to Technavio, a technology research and advisory firm, global Internet ad spending could rocket to $251.3 billion by 2021 from ~$160 billion in 2016, as shown in the chart above.

However, eMarketer has a rosier projection of the global Internet advertising industry, noting that the industry could grow to more than $335 billion in 2020 from $194.6 billion in 2016. eMarketer sees Internet ad spending rising to account for more than 46% of the worldwide media advertising market, which it projects could reach $724.1 billion by 2020.

The future looks promising

These projections paint an optimistic outlook for Alphabet, whose Google division is a driving force in the online advertising sector. However, it faces growing competition from Facebook, Amazon, Groupon (GRPN), and Verizon (VZ).

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