Third Quarter Earnings: The Facebook & Google Duopoly

It is that time of year again – third quarter earnings and the results from both Facebook and Google were astonishing. So much so that CEO of Digital Content Next, Jason Kint, actually tweeted a chart that used data from eMarketer to demonstrate how the duopoly actually control 60% and 70% of the ad market.

Yesterday, Facebook announced their third quarter earnings, which represented a 49% year-over-year increase for advertising with over $10.3B in ad revenue and mobile advertising accounting for 88% of that total. According to Forbes, mobile advertising revenue grew because of the frequency of ads as well as an increase in the price of ads that were shown in the News Feed. The price per ad grew 35% and ad impressions rose by 10%. Investors would like Facebook to expand mobile advertising revenue beyond the News Feed and believe that monetizing videos ads through Watch tab could be most profitable in their future

However, despite Facebook’s soaring mobile advertising revenue results this quarter, Zuckerberg sternly warned analysts that the company’s investment in security may affect immediate future profits.

“Our community continues to grow and our business is doing well,” said Mark Zuckerberg, Facebook founder and CEO. “But none of that matters if our services are used in ways that don’t bring people closer together. We’re serious about preventing abuse on our platforms. We’re investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”

Along a similar vein, Alphabet reported a total earnings of $27.77B compared to the $27.2B that analysts predicted. Just a year ago, Alphabet reported earnings of $22.45B. Twenty four percent of the revenue increase was due to the company’s mobile search advertising business and the YouTube video site

“Revenues of 27.8 billion were up 24% year-on-year, and also up 24% in constant currency. Advertising revenues benefited from strong performance in sites, which was powered by tremendous results in mobile search. Healthy growth in network revenues was again led by our programmatic business,” said Alphabet’s Chief Financial Officer Ruth Porat.

Based on both tech giants, quarterly earnings – the role that mobile advertising has taken for both companies is the source of major revenue increase – so much so that they both take the majority stake in total ad revenue. The challenge for both of these companies in the coming year is to find additional ways to garner ad revenue so they can maintain a consistent increase in ad revenue year over year. And maybe save a little for some other players.

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