advertising-industry

A Quick Glance At The Digital Advertising Industry

The digital advertising industry has become a multi-billion industry dominated by a few key tech players. While the industry advertising dollars are also fragmented across several small players and publishers across the web. Most of it is consolidated within brands like Google, YouTube, Facebook, Instagram, Amazon, Bing, Twitter, and Pinterest.

digital-advertising-industry-growth-2017-2019

Google and YouTube advertising business models

when-was-google-founded
Google LLC was created in 1998. However, the underlying algorithm (PageRank), which would enable Google to build a successful product and gain traction in the market, was built by Larry Page and Sergey Brin at Stanford University in 1996 as part of a research project to develop a search engine.
how-does-google-make-money
Google has a diversified business model, primarily making money via its advertising networks that, in 2019, generated over 83% of its revenues, which also comprise YouTube Ads. Other revenue streams include Google Cloud, Hardware, Google Playstore, and YouTube Premium content. In 2019 Google made over $161 billion in total revenues.

Google’s advertising revenue growth in 2019 was driven by a change in paid clicks and cost-per-click on Google properties and the change in impressions and cost-per-impression on Google Network Members’.

What are some of the factors affecting Google’s advertising revenues?
• advertiser competition for keywords;
• changes in advertising quality, formats, delivery or policy;
• changes in device mix;
• changes in foreign currency exchange rates;
• fees advertisers are willing to pay based on how they manage their advertising costs;
• traffic growth in emerging markets compared to more mature markets and across various advertising verticals

Google advertising revenues consist of:
Google Search & other consists of revenues generated on Google search and other Google-owned and operated properties like Gmail, Google Maps, and Google Play;
YouTube ads consists of revenues generated primarily on YouTube properties;
Google Network Members’ properties consist of revenues generated primarily on Google Network Members’ properties participating in AdMob, AdSense, and Google Ad Manager.

The growth was primarily driven by interrelated factors including increases in search queries resulting from ongoing growth in user adoption and usage, primarily on mobile devices, continued growth in advertiser activity, and improvements in ad formats and delivery.

Facebook advertising business model

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Advertising is generated by displaying ad products on Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications. Marketers pay for ad products either directly or through their relationships with advertising agencies or resellers, based on the number of impressions delivered or the number of actions, such as clicks, taken by users.

  • In 2019 increased by $14.86 billion, or 27%, compared to 2018.
  • The increase was almost entirely due to an increase in advertising revenue as a result of an increase in the number of ads delivered, partially offset by a slight decrease in the average price per ad.
  • In 2019, the number of ads delivered increased by 33%, as compared with approximately 22% in 2018.
  • The increase in the ads delivered was driven by an increase in the number and frequency of ads displayed across our products, and an increase in users and their engagement. In 2019, the average price per ad decreased by 5%.
  • The decrease in average price per ad was primarily driven by an increasing proportion of the number of ads delivered as Stories ads and in geographies that monetize at lower rates.

Twitter advertising business model

how-does-twitter-make-money
Twitter is a platform business model, monetizing the attention of its users in two ways: advertising and data licensing. In 2018, advertising represented 86% of its revenue at over $2.6 billion. And data licensing represented over $424 million primarily related to enterprise clients using data for their analyses.

Twitter ad platform enables customers to advertise across the mobile ecosystem, both on Twitter’s owned and operated properties as well as off Twitter on third-party publishers’ websites:

  • MoPub, a mobile-focused advertising exchange, which combines ad serving, ad network mediation and a real-time bidding exchange.
  • Twitter Audience Platform, an advertising offering that enables advertisers to extend their advertising campaigns with Twitter Promoted Products to audiences.

Total revenue for 2019 was approximately $3.46 billion, an increase of 14%, or 15% on a constant currency basis. Advertising revenue grew 14%, or 15% on a constant currency basis, primarily driven by 21% growth in the US.

Microsoft’s advertising business model

The search business includes Bing and Microsoft Advertising. Microsoft also has several partnerships with other companies, including Verizon Media Group, through which Microsoft provides and monetizes search queries.

Amazon advertising business model

Amazon advertising is directed to sellers, vendors, publishers, and authors, through programs such as sponsored ads, display, and video advertising. Other revenue primarily includes sales of advertising services.

Pinterest advertising business model

how-does-pinterest-work-make-money
Pinterest makes money by selling advertising for marketers and companies that can gain visibility for their brands and more sales for their shops. In 2018, Pinterest made over $755 million in advertising revenue and it had 250 million monthly active users. 

Pinterest offers both brand and performance ads, with performance representing approximately two thirds of Pinterest’s revenue as of 2019.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here