As Google’s stellar Q2 performance showed, the company is capable of beating even the rosiest of expectations and putting doubters to shame. While search is still where the money is for Google (NSDQ: GOOG), display advertising was a significant part of its success this quarter. Despite talk of a backlash from publishers and advertisers, it would appear that nothing is standing in its way as it looks to build on its burgeoning hegemony in display.
Google wasn’t very specific about its display results in Q2, but observers have found reason enough to believe that graphical ads are rapidly becoming a major part of its business.
Differing of opinion: There is some disagreement about whether Google is the top dog in display. Last spring, IDC analyst Karsten Weide said Google had pulled ahead of long-time display leader Yahoo (NSDQ: YHOO). The researcher found that Google’s net U.S. display ad revenue share grew to 14.7 percent in Q1 from 13.3 percent in Q4, while Yahoo’s declined from 13.6 percent to 12.3 percent during that period.
The Facebook challenge: eMarketer is predicting that Google’s display ad revenues will top $1 billion for the first time in 2011. Unlike IDC, eMarketer says the company’s share of overall U.S. display ad revenues will grow to 9.3 percent — a big step up from the 8.6 percent share in 2010, when Google’s U.S. display revenues rose an estimated 140.5 percent to $855 million.
In comparison, eMarketer points to Facebook’s share of U.S. online display ad revenues as rising to 17.7 percent in 2011, up from a 12.2 percent share last year. Yahoo’s slice of the U.S. display market is expected to decline to 13.1 percent over the next five months, down from 14.4 percent in 2010, according to eMarketer. Overall, the researcher is calling for U.S. display ad spending to jump 24.5 percent to $12.33 billion in 2011, up from $9.91 billion in 2010.
‐¨‐¨The pressures: No matter whose numbers you pick, it’s clear that Google and Facebook will be battling it out for display dominance. With Google+, the company’s umpteenth try at establishing a viable social network in the U.S., surpassed 10 million members in two weeks since launching a relatively wide beta test, it’s conceivable that this could dent Facebook’s growth, which is already showing signs of slowing a bit. Still, Google+ may be a hit with the tech elite, but that doesn’t mean the people who help make up Facebook’s 750 million users will abandon their FarmVilles for Google. But surely, enough will use both and that will inevitably pull away advertising dollars that Facebook had a virtual lock on.
And while Yahoo, AOL (NYSE: AOL) and Microsoft (NSDQ: MSFT) may not have much of a chance of passing Google by, they’re not about to disappear either. The Google Display Network has mostly been relying on small businesses that are adopting its search ads, while the portals are increasingly positioning themselves as premium brand plays.
Exchanges over social ads: As it awaits regulatory approval, Google’s $400 million offer to buy supply-side platform AdMeld is designed to tilt those dollars in its favor, as the ad exchange model continues to rise (AdMeld’s services are aimed at helping premium publishers navigate real-time bidding exchanges, and therefore, could be also be used to attract more big brand ad dollars). Meanwhile, Facebook has a huge head start on Google in that area and has established relationships with brand advertisers.
The assumption is that Google+ will not have as much mass appeal as Facebook. It’s too early to say one way or the other. But the fact is, Google doesn’t need to top Facebook. It just has to be big enough — and there’s every reason to believe Google+ will be big and it will provide a large scale foundation for display advertising.
But Google’s eyes are wider than social media. It already has a strong hand in the business of automated ads and managing exchanges both on the marketer/agency end of the spectrum through its demand-side platform Invite Media. And it probably will win AdMeld on the other end.
Earlier this week, AdAge reported on Google’s building out that automated display business even further with its Display Data Exchange. With all sides of the media buying and selling process accepting some degree of audience buying as the future of the business, Google is better positioned to dominate this arena than any other company. So think of Google’s Q2 performance as just a taste of what display will mean to its bottom line — and ultimately, what Google will mean to display.