Even as Facebook (META 0.16%) looks for ways to diversify its sources of revenue, and has chalked up some wins in that regard lately, the majority of revenue and earnings growth will always come from advertising. But it's Facebook's emphasis on the fast-growing mobile-ad business that's really making waves, and even beginning to make a dent in Google's (GOOG -0.75%) (GOOGL -0.77%) world.
Of course, much of Google's ad revenue is derived from search-related results. But some industry pundits believe the gap in mobile-advertising revenue between the two behemoths will continue to shrink. Mobile, it turns out, is great for ads, but many users forego search on their tablets or smartphones, opting to go directly to their site of choice. And as a recent survey confirms, marketing pros also recognize the effectiveness of both mobile and desktop advertising on Facebook.
What marketers are saying
Social media analytics firm Socialbakers completed a survey recently of over 500 marketing professionals from 82 countries, across multiple industries. The purpose of the survey was to gain insight from the folks making the decisions of where to spend their company's digital ad dollars. The results make it pretty clear that Facebook is head and shoulders above the rest, including Google's YouTube.
Of the four platforms the marketers mentioned in Socialbakers' study, 92% of them cited Facebook as one they advertise on. Google's YouTube was a distant second, garnering 35% of the respondents' ad dollars, followed by 24% that use Facebook-owned Instagram, and 23% that opted for Twitter. Cross-platform marketing accounts for the percentage overlap.
Part of what makes Facebook so attractive for long-term investors is that even with its outstanding growth of late, there are still multiple opportunities to continue boosting ad revenues. Marketers are already targeting Facebook as the online advertising site of choice, but it's becoming an even more valuable resource for client companies. In addition to generating incredibly successful click-through rates, companies are looking to Facebook as a means to build and maintain its brand, a long-term initiative that will help drive revenues.
The surveyed marketers also reinforced the importance of mobile advertising. Though a combination of both desktop and mobile Newsfeed ads were cited as the most effective, the success of mobile-only spots compared favorably. With 945 million of its 1.23 billion monthly average users mobile, Facebook is ideally positioned to continue eating away at Google's share of the digital ad revenue pie.
The power of mobile
In 2014, mobile ad spending is projected to skyrocket from just shy of $18 billion last year, to around $31 billion. Google still owns 49% of those mobile dollars, but that's down from the previous year and is expected to decline even further in 2014, to about 47%. Last year marked the first time Google's mobile ads revenues held less than half of the overall market. The culprit? Facebook.
By year-end, Facebook will own an estimated 21% of the mobile advertising market. That may seem like a pittance compared to Google's expected 47% share, but just two years ago Facebook only captured 5.4% of mobile advertising. And with the monetization of Instagram in full swing, as the recent $40 million deal with advertising giant Omnicom attests, the mobile gap between the two digital heavy weights should continue to dwindle.
Final Foolish thoughts
The good news for Facebook fans is there's more to hang your hat on than the positive feelings among the marketing community. Video is finally available to Facebook advertisers, and will find its way to Instagram soon, too. This year will be the first full year Instagram has offered ads, so virtually all its revenue in 2014 and beyond will be incremental. Also, though small by comparison, Facebook's estimated $1 billion annual run rate from gaming should improve as Facebook incorporates its Oculus virtual reality acquisition. Marketers all around the world know got it right: there's a lot to like about Facebook.
