In the marketing industry, there's one axiom that's particularly apt: Ad dollars follow eyeballs. In determining ad spend, Madison Avenue is keenly aware of which marketing outlets are growing in both user size, and in user engagement. During the last decade, there's a definite trend toward advertisers appropriating ad spend to digital outlets, in part on the strong growth of social-media networks.
If data from eMarketer is correct, we can continue to look forward to social-media network-ad growth. The marketing analytics company predicts U.S. social network ad revenue to grow to $16.5 billion in 2017, up from $7.3 billion in 2014. As a result of this growth, social-media networks are expected to increase from 14.7% of digital ad spend to 21.9%.
Parsing eMarketer's data, however, it seems Facebook (NASDAQ: FB) is better positioned than Twitter (NYSE:TWTR) to profit from the tremendous increase in social-media ad spend.
Two networks are better than one
While all social-media investors should be encouraged by the industry tailwinds, Facebook has a unique opportunity to grow above and beyond the industry, more so than its 140-character competitor. And that's because of the $1 billion cash-and-stock acquisition of photo-sharing network Instagram, announced in 2012.
eMarketer's data gives insight into how Instagram provides Facebook growth potential above and beyond the rate of the overall industry. According to eMarketer's data on U.S. companies with more than 100 employees using social networks for marketing, only 32.3% used Instagram for marketing this year, with that figure expected to more than double, to 70.7%, in 2017. For its eponymous site, the percentage is expected to increase one percentage point (84.7% to 85.8%).
Interestingly enough, eMarketer predicts Instagram will push past Twitter in this time frame. Twitter is expected to increase from 65.8% to 67.2%, closely mirroring Facebook's growth, but with a lower percentage of businesses using the outlet.
This appears to be a trend
eMarketer's projections appear to confirm a trend with users and celebrities shifting time away from Twitter to Instagram. Earlier, Twitter was compared to Facebook directly, and was valued as such, but slowing user-growth figures amid the massive growth from Instagram has now relegated Twitter to a competitor of Instagram's. Late last year, Instagram pushed past Twitter as it announced 300 million monthly active users, and continues to lead the service amid massive growth. It's only natural for advertisers to follow these users.
In the end, however, investors in both companies should be encouraged by the continued strong growth of advertising in social-media networks at the expense of other digital outlets. The data suggests that Facebook is in a better position to consolidate market share and grow faster than the overall market, as Instagram continues its phenomenal growth.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.