The spending on digital advertising in the US is set for another year of startling growth. But the major eye-popping fact is the strengthening position of Facebook Inc. (NASDAQ:FB) in digital display ad market which will widen the gap with Google.
The research firm eMarketer estimates that in the US, total spending on digital advertising will reach $83 billion in 2017. This represents a growth of 15.9% year-over-year and is congruent with the continuing trend of advertisers flocking to digital at the expense of traditional formats. In fact, driven by mobile and video, eMarketer predicted digital ad spending in the US to overtake TV ad spending by the end of 2016 for the very first time.
The Google And Facebook Duopoly
The report from eMarketer backs Google to maintain its dominance in total ad revenues in the US. The estimated market share of Google for 2017 stands at 40.7%, which would be around double that of second placed Facebook. As the world’s most popular search engine, Google’s impressive revenue numbers are in large part due to their dominance in search. This can be attributed primarily to a change in the pattern of usage by people in general. With over 3 billion people worldwide using the Internet, the information hungry people are turning to Google looking for the relevant information. The exploded adoption of the mobile internet has only accelerated this phenomenon.
The resurgence of search is in contrast to last year when ad spending on searches was down by 18.6%. This year the predicted growth for searches stands at around 14.1%.
Facebook Claims The Display Market in the US
In the US, while Google maintains its dominance in Search, Facebook captures the display market. The social media giant is estimated to earn $16.33 billion in digital display ad revenues in 2017, an increase of 32.1% over 2016. This would mean a greater share for Facebook with 39.1% of the total US display market. This growth comes at the expense of Google, Yahoo and Twitter. In recent years, Facebook has put a real emphasis on video content, introducing plans for video programming and live streaming. This is now paying dividends, as users are increasingly consuming video content on the platform.
The biggest driver of Facebook’s ad revenue growth is Instagram, expected to account for 20% of Facebook’s US mobile revenue in 2017, up from 15% in 2016.
Google’s display business is also expected to grow to $5.24 billion in 2017. However, they are expected to lose overall market share to Facebook with a 12.5% in 2017.
How The Other Players Are Faring
While Google and Facebook are both expecting healthy growths in ad revenue, things are not so pleasant for Twitter. Their ad revenue growth in the US has stagnated. WSJ actually predicts a 4.7% decline in ad revenues in 2017. This comes amidst reports of financial troubles and lowering stock prices for Twitter.
On the other end of the spectrum, the new boy on the block, Snapchat, is set for explosive growth. After their IPO, Snapchat’s ad revenue is set to grow a whopping 157.8% in the US in 2017. This would put their total revenue at $770 million. However, despite their exponential growth, Snapchat will only account for 1.3% of the US mobile ad market in 2017, a figure that will rise to 2.7% by 2019.
The State And Future Of Digital Ad Spending In The United States
In the US, The digital ad industry is set for significant growth in the next few years, both in ad spending and revenues. The digital advertisement spending will increase by roughly $10 billion every year from 2017 to 2020. It would mean that by 2020, a staggering $113.18 billion would be spent on digital advertising. This growth in digital ad spending in the US will be driven primarily by search and display sectors, which are estimated record 12.5% and 18.2% growth rates, respectively, in 2017. This is followed by Classifieds (10.4%), Email (9.7%) and Lead generation (5.2%). Mobile messaging is set to experience a decline in spend by 0.4%. However, the gulf between display and search is expected to nearly equalise by 2020.
While the expenditure on digital advertising in the US continues to grow, the growth rate is looking to depreciate. The year over year growth rate is estimated to fall in 2017, down from 20.5% in 2016. By 2020, the growth rate will fall to 9.5%. Ad spending growth rate on Mobile, Social and Desktop is all set to drop, with the only search experiencing a positive growth rate in 2017.