Who will the current war in digital advertising – Facebook or Google?

Welcome to the second in a series of AtlasTrend articles where two listed companies will compete head to head to determine which company’s shares offer a better risk adjusted investment.

As you may recall, the rules are simple. Five rounds, with a winner for each round and then an overall winner. In this head to head contest – who will win the digital advertising war?

The following information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.

Our two competitors

Our two competitors do not really need an introduction given their pervasiveness in our everyday lives and the fact that they have both grown to become two of the largest companies in the world.

First, we have Facebook.  Famously founded in 2004 during the founders’ time at Harvard University, Facebook has grown into a social media giant with its 1.79 billion monthly active users and a market value of US$349 billion.  Along the way, it has created or acquired other social media platforms such as Facebook Messenger (over 1 billion users), WhatsApp (over 1 billion users) and Instagram (over 500 million users).  It continues to be led by its enigmatic founder, Mark Zuckerberg who is investing heavily in new areas of growth such as virtual and augmented reality.

In the other corner is Google (owned by listed parent company, Alphabet).  Founded in 1998 and named after the number googol (10 to the power of 100), Google has become the world’s dominant search engine and has a market value of US$537 billion.  Although Google’s ubiquity has even created new verbs (such as to “google” or “googling”) in our vocabulary, it is perhaps its other assets that drive its growth and future value.  Assets such as Chrome (its web browser), Google Maps, Gmail, Android (its mobile device operating system) and YouTube with its 1 billion viewers.  Like Facebook, Alphabet is also developing a range of new technologies such as artificial intelligence and driverless cars.

Perhaps, we can also spend a short moment here to mention who are NOT the winners in this growing digital war.  There are many casualties all bound by a common thread – traditional advertising.  In the last 5 to 10 years, digital advertising has drastically taken away advertising revenue across all forms of traditional media – firstly, print and now radio, TV and cable.  Digital advertising revenues are expected to be more than TV advertising revenues for the first time ever in 2017 according to Publicis Group (digital advertising will have a 38% market share of the US$603 billion global advertising market, compared to TV’s 34% market share) and by 2020, digital advertising market share in the U.S. will reach almost 50% according to eMarketer.  This has also clearly impacted the role of traditional advertising agencies, who have seen their roles diminished in the advertising food chain.

Why are we putting Facebook and Google in a head to head contest?

Whilst both companies use different strategies to generate advertising revenue, Google via its search engine and Facebook via its social network, it is becoming more and more apparent that these two companies are starting to dominate not only the digital advertising market but also the advertising market overall.  The Interactive Advertising Bureau believes that both companies had a combined 64% market share of the US$59 billion U.S. digital advertising industry in 2015 while U.S. venture fund, Kleiner Perkins Caufield & Byers believes the market share is closer to 75%.

Therefore, the question is which is the ideal channel (Google’s search engine or Facebook’s social network) that will allow one of these internet titans to win the digital advertising war?

 

Sign up for free to find out the winner in this contest (who is the current leader in digital advertising, who is winning in mobile and video, who has greater financial firepower, who has the better valued shares, who has the edge in their “other bets”). You’ll gain access to the remainder of this report plus many more investing ideas exclusive to AtlasTrend members.