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. The industry’s 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, TikTok, which is growing very quickly, and Pinterest.

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 (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, this comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).

Google’s advertising revenue growth 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

facebook-stats

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 makes money in two ways: advertising and data licensing. In 2021, Twitter generated $4.5 billion from advertising and $570 million from data licensing. While Twitter generated $5 billion in total revenues, it lost 221 million.

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

Total revenue for 2021 was approximately $5 billion, mostly from advertising ($4.5 billion).

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.

how-does-tiktok-make-money
TikTok makes money through advertising. It is estimated that ByteDance, its owner, made over $17 billion in revenues, for 2019. While we don’t know the exact figure for TikTok ads revenues, given it counted over 800 million users by 2020, it is a multi-billion company, worth anywhere between $50-100 billion and among the most valuable social media platforms of the latest years.

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