With Facebook announcing its Q3 2015 results last week, here’s the latest quarterly comparison that shows how the company’s gross revenues compare to Google’s after each existed for 13 quarters as a publicly traded company. Google is in blue, while Facebook is in orange.
For the purposes of this comparison, Google benefited favorably because its 13th quarter ended December 31, 2007, fresh on the heels of a holiday season. Facebook should see a larger proportional increase in revenues in a 14th quarter comparison for the same reason.
I share this simply to point out that Facebook is on a growth path that is very similar to the one Google carved out for itself over the first several years of its existence as a publicly traded firm. Just as marketers view Google as essential today, so, too, is Facebook earning that distinction.
They have become invaluable in different ways. Google’s AdWords lets advertisers bid on keywords so that they can connect with consumers who are actively searching for something. Facebook, on the other hand, uses its rich trove of data about its users to let advertisers access actual people based on their behaviors, demographics, and preferences. Facebook also lets companies upload their own customer data so that they can either include or exclude them from a campaign.
Both represent powerful tools to connect with consumers in ways that drive revenue for advertisers.
Both also fascinate investors, who wonder how much more they can grow. With that in mind, here’s one reason why advertisers and analysts should feel bullish about each company, as well as one reason to be concerned.
Why you should be bullish on Facebook:
There’s a lot more room to grow on top of the most sophisticated advertising technology platform available from any social media company. As Facebook has shown with its rollout of Instagram, repurposing the plumbing it built to connect advertisers to Facebook users has allowed it to grow rapidly. At some point, Facebook may choose to apply that same backend technology to Messenger (700 million users) and WhatsApp (900 million users). While many of these consumers also use Facebook and therefore represent a duplicate audience, it’s still a significant source of new advertising inventory and rich user data for advertisers.
Why you should be concerned about Facebook:
As Radio Free Mobile illustrates, Facebook still dominates a relatively small portion of a user’s digital life. For gaming, search, shopping, and digital media content, users have many other choices. At some point, its core product’s growth will level off, which means that it will need to engage them in more ways to monetize at a higher rate. Grabbing a bigger chunk of digital life would enable that to happen.
Why you should be bullish on Google:
Android, Google’s smartphone operating system, commands over 82 percent global market share. Because Android is open source, though, Google has not been able to exercise control over the platform in the way Apple has with iOS. That lack of control has meant that users have been slow to update to the latest version of the software, and that has dampened Google’s ability to monetize its mobile growth. Lately, it looks like Google is preparing to take over Android, which eventually would end its life as an open source platform. That would enable the company to upgrade more of its users faster.
Why you should be concerned about Google:
Search still commands the lion share of Google’s ad revenues, but consumer migration to mobile means more consumers are searching within apps, as opposed to the web. Apps such as Yelp (restaurants) and Amazon (shopping) now capture more search. Google will need to drive more users into its core mobile services – Google Maps, YouTube, Gmail, and its app store – to keep pace with this mobile shift. They also will need to deal with the rise of ad blocking, which threatens its display business.
The good news for advertisers and investors is that neither of these headwinds facing Facebook and Google are life threatening. Both firms are extraordinarily well positioned to address their risks. The exciting news, especially for mobile marketers, is to see Facebook continuing to grow its user base and develop more tools for advertisers to reach them with engaging creative.