Google Ad Revenue Growth Will Shrink To Just 9% In 2016 [REPORT]

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Google Ad revenue growth has been on a steady decay for the last few years. But it will be the first time ever in the historical backdrop of the internet behemoth that the Y-o-Y growth in its ad revenue will drop to the single digit. In 2016, due to the growing competition in online advertising space from its most outstanding adversary Facebook, Google will record mere 9% growth in its ad revenue to $57.80 billion, estimates research firm eMarketer. This is a significant drop contrasted with the 15% growth the company had recorded a year ago.

However, this doesn’t mean Google will lose its numero uno position in the digital advertising market. In spite of moderate development, the company is expected to hold the lion’s share of worldwide digital ad revenues. eMarketer predicts, 30.9% of worldwide digital ad revenues in 2016 will go to Google, trailed by Facebook. While in digital ad revenue Facebook is fast closing the gap, Google’s position in net search ad revenues will be far more strong with 55.2% share.

Googlereported its first quarter earnings this week, and under the Alphabet Inc., it has posted $18 billion in ad revenue in Q1 2016. Though the result is being seen as ‘tremendous start’ of the year by Google by Ruth Portal, CFO – Alphabet Inc, the share of the Alphabet fell about 6% in after-hours trading as revenue fell short of industry analysts’ expectations.

GOOGLE MOBILE AD REVENUE 2016

One of the biggest drivers of Google’s ad revenue growth is mobile. The exploded adoption of Smartphone, mobile internet, and apps have helped Google to record a greater number of ad requests from individuals around the world. In 2016, it is estimated that mobile will represent nearly 59% of Google’s total net digital ad revenue. The company will record 40% Y-o-Y growth in its net mobile ad revenue. Likewise, it is intriguing to discover that by 2018, the share of net mobile ad revenue will rise up to 72%, reaching $48 billion. That implies, the net mobile ad revenue of Google will double in the next three years while the company’s total net ad revenue will grow only by 21% amid the same period.

The growth in Google’s net mobile ad revenue by 2018 is clearly indicating the flourishing mobile advertising scenario worldwide. By 2018, the mobile advertising spending is expected to touch $167 billion mark, $97 billion of which will be accounted by the US and China alone.

Google is vigorously investing on Artificial Intelligence to improve its mobile search, which will eventually strengthen its position in the mobile advertising market. Google has attributed the growth in its Q1 2016 ad revenue to enhanced app-install and promotion ads. Google is aware of the fact that app install will be the key to success in the mobile ad market.

YOUTUBE FIGURES SIGNIFICANTLY IN GOOGLE’S AD REVENUE GROWTH 2016

Google net ad revenues coming from video sites is expected to rise significantly. In 2016, YouTube’s contribution is expected to total $5.18 billion, 8.9% of Google’s total net ad revenue, up from 0.08% last year. In Q1 2016, Google didn’t disclose how much YouTube contributed to the company’s total net ad revenue; however, the company claimed that the YouTube revenue in Q1 2016 grew at ‘significant rate.’

Unlike the net ad growth in mobile and overall ad revenue of Google, Video ad revenue growth rate is increasing year over year. The improving internet and mobile data infrastructure are accelerating the adoption of video content, which is eventually resulting in increased ad revenue for Google. The growth in watch time on YouTube is up at least 50% year over year and more than half of YouTube views are come from mobile devices nowadays. These factors and stats are the clear indicators of why YouTube’s contribution is growing with each passing year. From 40.6% growth in net ad revenues from video sites last year to estimated 21.1% in 2016, YouTube video are in intense demand. However, in comparison to Google Search, YouTube ads are less inexpensive because they are less likely to lead to direct sales.

ACTIONABLE INSIGHTS:

• The year over year growth of Google’s ad revenue from mobile is rising. As advertisers are betting big on mobile, publishers should start adopting the mobile-first strategy.
• Advertisers must design objective-based campaigns and select the marketing methods accordingly. While mobile and Desktop campaigns should be focused on lead generation, YouTube ads for branding and marketing. However, running ads both on mobile and YouTube is advisable.