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Google to See Unprecedented Drop in Ad Revenue

Google is expected to see a history-making drop in advertising revenue, as eMarketer estimates a decline of 5% by the end of 2020.

This marks the first time since eMarketer began estimating Google’s ad revenue that it has projected a decline of any amount.

The drop will cause Google to hold a lesser share of the US digital ad market, going from from 31.6% last year to 29.4% at the end of this year.

Impact of COVID-19

There’s no doubt the COVID-19 pandemic is the reason behind Google bringing in less revenue from advertising.

Before the pandemic, eMarketer predicted Google’s US ad revenue would grow 12.9%. However, it was estimated Google’s share of the US digital ad market would continue its downward trajectory.

Nicole Perrin, eMarketer principal analyst at Insider Intelligence, states:

“Google has been growing its net US ad revenues at a slower rate than the overall digital ad market since 2016, so this year will continue a trend of Google losing digital ad market share in the US.”

Travel Industry Grounded

Google’s decline in US ad revenue is mainly attributed to one of the hardest hit industries reeling in their advertising spending.

Prior to the pandemic, the travel industry spent much of its advertising budget on Google search ads. The whole travel industry being shut down means a major hit to Google’s ad revenue.

Perrin goes on to state:

“Google’s net US ad revenues will decline this year primarily because of a sharp pullback in travel advertiser spending, which in the past has been heavily concentrated on Google’s search ad products.

Travel has been the hardest-hit industry during the pandemic, with the most extreme spending declines of any industry.”

Ad spending in the ecommerce industry has also slowed, with Amazon pulling its ads from Google search earlier this year, Perrin adds.

As it relates to Google’s US ad revenue from search advertising specifically, it’s estimated to see a sharp drop of 7% by the end of 2020.

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As a result, Google’s share of the search ad market is expected to decline from 61.3% to 58.5% year over year.

“Search still accounts for the vast majority of Google’s net US ad revenues, so even though YouTube will continue to grow this year, it won’t be enough to fully counterbalance the more negative trends in search.”

Google to See Unprecedented Drop in Ad Revenue

Ad Revenue Growing for Facebook & Amazon

Google’s digital ad competitors, Facebook and Amazon, are not expected to suffer a similar drop in advertising revenue.

Facebook’s and Amazon’s ad revenue will grow this year, eMarketer says, but at a significantly slower pace.

“Facebook and Amazon will continue to grow but at severely depressed rates compared with earlier expectations. The triopoly’s size this year will be similar to what it was in 2019—increasing by $1.69 billion—but with a somewhat different internal breakdown.”

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Google to See Unprecedented Drop in Ad Revenue

As shown in the chart above, Facebook’s ad revenue will grow by less than 5% this year compared to 26% from 2018 to 2019.

However, Facebook will see an minor increase in market share as a result of Google giving up some of its share this year.

Amazon will see the greatest ad revenue growth of all three companies, having not been affected by the travel industry’s woes.

Amazon will also take more share of the digital ad market despite its slower grow in revenue.

Source: eMarketer

 




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