Even Google can’t avoid the vicious impact of COVID-19 on the ad industry.
The ad giant’s net US digital ad revenue will decline by 5.3% this year to $39.6 billion, according to eMarketer, even as it projects the digital ad market as a whole to grow 1.7% to $134.7 billion. As a result, Google’s market share will shrink to 29.4%, down from 31.6% last year.
This is the first time Google’s ad revenues have declined since eMarketer began forecasting on the platform, said principal analyst Nicole Perrin. Before the pandemic, eMarketer projected 12.9% growth at Google, with its market share shrinking slightly.
“We all are aware of the pandemic and how tough it’s been on the economy,” she said, “but Google having revenues decline is pretty striking.”
The decline will come from search, which makes up roughly 80% of Google’s advertising business, as well as programmatic. EMarketer anticipates Google’s search revenues will decrease by 7.2%, and programmatic will decline by roughly 5%. Google’s search business has been hit hard by a broad pullback from travel advertisers as their businesses shut down due to the pandemic.
“[Travel advertisers] had a relatively large share of spend on Google search,” Perrin said. “It’s an important category for Google.”
The decline in ad spend exposes Google’s over-reliance on travel brands and vice versa to fuel search activity and spend. That will likely change moving forward, as Google focuses on diversifying its offerings into new areas such as cloud and shopping, as well as bringing more direct response ad products to YouTube. YouTube will continue to grow this year, but not enough to counterbalance declines in search.
“I would expect Google to continue doing a lot of things they're working on in those areas,” Perrin said.
Travel brands, meanwhile, will continue to spend less on customer acquisition and try to diversify spend away from Google as their businesses slowly recover.
“Their concern is, are we paying for travelers who would’ve bought from us anyway?” Perrin said. “That’s a higher strategic question around acquisition marketing.”
On Google’s coattails
As Google loses share, Facebook and Amazon will continue to gain, albeit at a slower rate than what eMarketer had predicted before the pandemic.
Facebook’s ad revenues will grow just 4.9% this year to $31.4 billion, compared to its 21% growth rate in 2019. And Amazon’s ad revenues will grow 23.5% this year to $12.75 billion, compared to its 39.4% growth rate last year.
Because of this slowdown and Google’s overall decline, the triopoly will remain flat this year at 0.2%, its lowest growth rate in a decade.
But unlike Google, Facebook and Amazon will continue increasing their share of the ad market, to 23.4% and 9.5% respectively, up from 22.7% and 7.8% last year.
Facebook isn’t necessarily stealing share from Google because their platforms are often used for different objectives, Perrin said.
But Amazon’s growth is directly impacting Google’s search revenues, as people search more for household products under lockdown. Amazon’s search revenues will grow 25.2% this year to $9.3 billion, growing its market share to 17%. Meanwhile, Google’s search market share will drop to 58.5% from 61.3% last year.
“The share of search is decreasing for Google and increasing for Amazon pretty quickly,” she said. “To the extent that people are shopping online more now, it tends to be a lot of the things you would get from Amazon.”
But Google’s business will likely bounce back by 21% in 2021, depending on the trajectory of the virus, Perrin said.