Could Facebook really eat into Google’s Advertising Business?
Mumbai, India -- (SBWIRE) -- 10/18/2013 -- Google Inc. (GOOG) came out all guns blazing this week, reporting robust performance for the three months ended September 30, 2013. Results were up in almost all key line items of their business both versus Q2 earlier and Q3 in 2012.
Third revenues increased to $14.9 billion compared to $14.11 billion three months earlier and $14 billion in Q3 2012. The biggest component of revenues, Google’s site and search advertising business, saw revenues increasing to $9.4 billion versus $8.9 billion in Q2 earlier and $7.7 billion in Q3 2012. Operating profits also saw a similar upward trend, reaching $4.3 billion in Q3 compared to $4 billion and $3.8 billion in Q2 2013 and Q3 2012 respectively.
Importantly, Google looks to now be well placed in the mobile advertising side of their business. At their Q3 earnings call on Thursday, Chief Business Officer Nikesh Arora stated that mobile was driving higher online advertising conversions.
Android has also seen extraordinary growth, with CEO Larry Page claiming that over a billion Android devices have now been activated worldwide. Later in a Q&A session with analysts, he said Google was very well positioned in mobile and they had tremendous services on Android along with search. He also said that he felt excited about mobile as they have the potential to improve people's experience as they move more into mobile and spend more time there. Google Play has also turned out to be an important part of the mobile business with Nikesh Arora calling it a key part of the Android experience.
Meanwhile, Facebook, Inc. (FB), Google’s most aggressive competitor in advertising, would be coming out with its third quarter 2013 results on the 30th of October. Facebook’s total revenues in Q2 stood at 1.81 billion compared to 1.458 billion in Q1 earlier. It has seen significant growth in its mobile advertising business with mobile ad revenues representing approximately 41% of total ad revenues in Q2 this year, up from a 30% share in Q1.
Advertiser numbers have also doubled from a year ago with the number of active advertisers crossing the 1 million mark in Q2. Facebook has been building deep relationships with marketers with its Founder Mark Zuckerberg calling expansion in the number of marketers and overall demand in their system their top priority at the Q2 call. At the same event, COO Sheryl Sandberg said they believed Facebook’s ad products were delivering impressive return on investment (ROI) for different types of marketers. Revenue from e-commerce firms doubled in Q2 on a year-over-year basis with direct response marketers taking advantage of high click-through rates and competitive CPCs to grow their businesses. Direct response marketers also offer huge potential as they can easily increase their budgets once they see Facebook delivering compelling ROI.
Google’s stock is nearing the $1000 mark, with it closing at $888.79 on the 17th of October. However, the market’s reaction to earnings would be seen on the 18th once news of its earnings finally filters through. Facebook’s stock has almost doubled from $26.51 since its Q2 earnings call on the 24th of July to close at $52.21 on the 17th of October. Assuming the current momentum in ad revenue growth is maintained, Facebook looks all set to be a major force for Google to reckon with in the immediate and near future.
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