Can Google Fight Off Amazon and Facebook in Online Ad Race?

Google appears to be  losing steam in the ongoing race to dominate the online advertising market, and competitors Amazon and Facebook are taking advantage of the stumbles. What’s happening now could signal bigger changes to come in the next few months or even years — though observes are still trying to determine the reasons for Google’s recent troubles.

Here’s the lay of the land: Google’s growth in paid clicks is slowing down, causing troubles with investors and, no doubt, a degree of joy among its main rivals for online commerce and advertising power. As revealed in Google’s first quarter 2019 financials, ad clicks across the Google sites also decelerated to 39 percent, as measured in terms of paid clicks.

At the same time, cost per click was down 19 percent.  The slowdown stood starkly against the 66 percent paid clicks growth seen during the fourth quarter of 2014, where costs were down 29 percent. The essence of it all? Traffic volumes for Google properties are not growing at a rate to cover the decreases in advertising prices.

Another issue is attached to this recent news: Searches — specifically, product searches, which help drive online commerce.

Google used to be the first stop on a consumer’s path to purchase, but it isn’t anymore. PYMNTS own research in 2015 stated that nearly 60 percent of the time shoppers started their product searches on Amazon, not Google. Other estimates about where consumers start their product searches vary, but the theme is the same: Google continues to lose significant ground to Amazon in capturing the eyes of consumers looking for products to buy online.

YouTube Concerns

Against that recent slowdown for paid clicks, Alphabet CEO Sundar Pichai and CFO Ruth Porat said that there were some changes in how some ads have been presented across both search and YouTube – and these changes (though not traced to mobile or the older desktop business) were behind at least part of the slowdown. Other theories tossed about in the last day or two include fresh difficulties with tracking ads via Safari, along with tougher online advertising from Amazon. As Bloomberg put it, “Amazon has excellent data on what people want to buy, and it’s been aggressively trying to get advertisers to use it for shopping ads, which are traditionally a major source of revenue for Google.”

Indeed, Amazon and Facebook keep making gains in digital ads at the expense of Google, according to data from eMarketer, which said that “U.S. digital advertising spend will exceed traditional ad spending in 2019 for the first time, increasing to $129.3 billion. By 2023, digital will account for 66 percent of total media spend.”

Google remains in first place when measured by the top five companies ranked by U.S. net digital ad revenue spend. That said, its share in 2019 is down to 37.2 percent, compared with 38.2 percent in 2018. Facebook, in second place, has a 22.1 percent share, up from 21.8 percent last year. And eMarketer said that Amazon, in third place, has an 8.8 percent share, compared with 6.8 percent in 2018. (Microsoft and Verizon round out the top five.)

Amazon Gains

As well, as mentioned above — and documented by PYMNTS research — Amazon keeps on making gains when it comes to product searches — a trend that, according to observers, underscores the eCommerce operator’s treasure trove of shopping-related data, and its expertise in using it.

Another recent poll drives home the advantage Amazon has in search over Google. According to an NPR-Marist poll, 44 percent of consumers try Amazon first when it comes to product searches. Only about a third said the same thing about Google.

That is resulting in a positive feedback loop for Amazon, according to a report from NPR — the more times consumers start their searches with Amazon, the more data about that significant part of the consumer browsing and shopping experience is collected and analyzed by the eCommerce operator. In short, Amazon gets even more knowledge about the average — or not-so-average shopper — knowledge that then can guide further development of Prime and other Amazon-backed programs and innovations.

Google, of course, just doesn’t intend to let that happen without a fight.

Take Shopping Actions, which lets retailers list products on Google Search, Google Express and Google Assistant on both mobile and voice devices — and in exchange, Google gets a cut of the purchases.

As Karen Webster noted in one of her PYMNTS columns, Shopping Actions is Google’s big shot across Amazon’s bow, giving consumers access to a universal shopping cart to fill and then buy the things they find when searching the web. Payment is made using the payment credentials that consumers have stored with Google (courtesy of the Google Pay upgrades announced last month), including payments credentials stored at a merchant site via the Chrome browser.

The program also gives participating retailers a chance to attach themselves to those search queries via sponsored posts.

But for Shopping Actions and Google to live up to its billing as commerce’s “next big thing,” it will have to convince the more than 60 percent of American consumers who start their search for what to buy on Amazon (according to PYMNTS data) to break that habit and instead use Google to start — and finish — their search there for what to buy, Webster also wrote.

Shifting Dollars

Obviously, when it comes to product search and digital marketing, Amazon is on a serious upswing — a trend underscored by a recent report that said  WPP, the biggest ad buyer in the world, increased its ad spend at Amazon in 2018, spending $300 million for clients on Amazon search ads. Of that budget, The Wall Street Journal reported 75 percent came from money that was allocated for Google search ads. The ad spend on Amazon by WPP is up between $100 million and $150 million from how much it spent on Amazon in 2017. In 2018 WPP did spend around $3 billion on Google search ads, noted the report.

According to PYMNTS coverage, analysts have estimated the value of Amazon’s ad business, in revenue, to be between $5 billion and $18 billion (or more) today, while others say it could be worth as much as $50 billion by 2028. Experts may disagree on the numbers, but all of them agree Amazon’s ad business is growing annually at a healthy clip — most estimate its growth stands at a 40 to 45 percent clip — faster than either Facebook’s or Google’s more mature advertising businesses.

As for Facebook, certainly don’t ignore that social media platform when it comes to this particular part of the online commerce race. Facebook is still weathering controversies related to data sharing, user privacy, politics and so-called “fake news,” but — as shown by the company’s recent Q1 financial report — still keeps adding users. Facebook’s daily active user base increased 8 percent year over year in the first quarter of 2019, to 1.56 billion on average as of March 2019. Monthly active users stood at 2.38 billion as of March 31, 2019, representing an 8 percent increase year over year.

For mobile advertising, Facebook said that in Q1, it accounted for 93 percent of all advertising revenue, up from 91 percent for the same period last year.

The race to sell more online advertising — and to enjoy the benefits from doing so — is hardly a free-for-all, of course, given the dominance of the three big players. But the new few months will provide more data about how much ground Google might cede in this particular area of the digital economy — and which company stands to gain the most if that happens. Search, of course, is closely tied to all this, and there is little indication that Amazon is losing steam in either of these areas.