Google (GOOG 0.74%) (GOOGL 0.55%) recently announced a new product, Customer Match, which lets advertisers upload email lists and match them to signed-in users on Gmail, Search, and YouTube.
For example, a travel company can upload a list of emails of members in its rewards program, and those customers will see ads from that company when they use Search, Gmail, or YouTube. Advertisers can also target users with similar marketing profiles who are not on their email lists but have signed into Google's services.
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Google also unveiled Universal App Campaigns, a new AdWords product which targets mobile app users across Search, YouTube, Play, and the Google Display Network with ads for other apps. If a user searches for puzzle games, for example, more in-app ads for puzzle games will be displayed across Google's ecosystem. Like other app-install networks, the developer sets a cost-per-install while setting up the ad campaign across multiple platforms.
These initiatives might be new to Google, but they're basically the same kinds of ad campaigns Facebook (META -0.52%) has run for years. Why did Google take so long to respond, and can these new initiatives widen its defensive moat against the world's largest social network?
The rising threat of Facebook
With 1.49 billion monthly active users at the end of last quarter, Facebook has a captive audience for ads in its News Feed. With every "like", check-in, photo, and status update, Facebook crafts a more detailed marketing profile for targeted ads. Facebook is also using new services, like hosted videos and in-site news publishing, to keep users within its site for longer periods. Research firm Ampere Analysis estimates that Facebook could deliver two-thirds as many video views this year as YouTube.
The popularity of Facebook also convinces many users to use its time-saving single-sign ons (SSOs) for third-party apps and sites, which enables it to keep mining data to create targeted ads. That's why Facebook's ad revenues surged 43% annually last quarter even as it throttled the number of ads it displayed. By comparison, Google's ad revenues rose just 11% last quarter. Google still generates a lot more ad revenue than Facebook, but Facebook generated more mobile display ad revenues in the U.S. than Google last year, according to eMarketer.
Facebook also owns Parse, a mobile backend platform which adds user authentication, push notifications, social media integration, location data, and data analytics to any app. It also sells app install ads with this service, which gives app developers a turnkey solution that handles both backend requests and ad campaigns in a single package. That strategy complements Facebook's Audience Network, which extends its ads to third-party apps.
Why Google is falling behind
With Facebook attacking Google on so many fronts, it's surprising that Google didn't launch Customer Match and Universal App Campaigns sooner.
One possible explanation for that delay is regulatory scrutiny. With a 67% share of the global search market (Net Market Share) and an 83% share of mobile operating systems worldwide (IDC), any effort to beef up Google's cross-ecosystem advertising tools could cause its competitors to cry foul. The U.S. Department of Justice, the FTC, and the European Commission also recently launched new antitrust probes into Google after rivals accused the company of limiting their access to Android in favor of its first party apps.
Another problem is that Google launched its own social network, Google+ to catch up to Facebook. Unfortunately, Google+ flopped, as Facebook had too much of a head start. Company insiders also told Business Insider that Google+ "was designed to solve the company's own problems" instead of being a "product that made it easy for its users to connect with others." The four years Google wasted on Google+ arguably gave Facebook even more time to squeeze into the gaps of Google's data mining and advertising ecosystem.
The key takeaway
Facebook might have landed a few dizzying blows against Google over the past few years, but investors shouldn't underestimate the search giant's ability to strike back harder. Google's introductions of Customer Match and Universal App Campaigns have arrived a bit late to the market, but the ability to mine and match user data cross Search, YouTube, and Gmail could be a potent way to counter Facebook's growth.
