Despite Amazon’s massive growth, Google is still maintaining a strong hold on digital advertising budgets overall, and it has shown accelerating ad revenue growth in the first half of 2018.
Last quarter, Google reported its ad business was up 23.8 percent year over year — that’s actually an acceleration from Q2 2017, when ad revenues went up only 18.4 percent from the previous year. The same trend happened in the first quarter of 2018, when ad revenues rose 24.4 percent from the previous year, compared with 18.8 percent year over year growth in Q1 2017.
There are several possible reasons for the discrepancy.
Not everything is sold on Amazon — yet. Large advertising categories such as auto, travel and some entertainment, including ticketed events such as movies or sporting events, still don’t conduct direct sales on the platform. Those companies don’t have any reason to advertise on Amazon, while Google search still drives a lot of direct sales. Money is moving over from television to Google for these categories, one agency executive noted.
Many agencies said Google is pushing its other ad products, especially video ads on YouTube. A lot of advertisers are spending more on the video service, with one executive noting clients can see above a 50 percent return on investment, or ROI, if the right ad shows up on the right category.
Google Search still provides a high ROI, and some companies, including Apple and Casper, prefer customers to buy from them directly rather than Amazon to save on fees. And Amazon’s business is a lot less developed outside the United States in certain regions, including some countries in the Asia/Pacific area.
Google is also taking the battle directly to Amazon, investing in tools that make purchasing online easier. Google Shopping, which competes against Amazon Marketplace, is a product search engine which helps people find items to purchase online, and counts Target, Walmart and Costco among its partners. Amazon temporarily stopped buying Google Shopping ads, but returned to the platform in July, according to Bloomberg.
But since Google is on top, growth will get harder, most agencies agreed.
“Google’s challenge is they have to find more money every year, and it’s harder and harder to find that in the ad business,” said Matt Mierzejewski, senior vice president and search capability lead at Merkle.
“They’re tweaking the search page, creating more automation, finding new retailers, and adding a lot of new ways as they try to edge out the next dollars.” Mierzejewski said Merkle is not seeing a shift in search budgets from Google to Amazon but that overall spending on Google is “flat.”
— Jillian D’Onfro contributed reporting.