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Competition in Advertising

Google has long been an advertising giant in cyberspace, but lately there have been some signs they have competition. The following article,, posted by quartz, discusses the shift in advertising power on the web. They point out that Google has seen “slowing” revenue growth from advertising. They also discuss how Facebook on the other hand, is finding new ways to successfully advertise, particularly with the presence of mobile devices today. According to the article, Google lacks a good way to display advertisements on mobile platforms, while Facebook has managed to integrate ads on their mobile platforms such that it takes up significantly more screen space in a non-intrusive way.  They also point out that Facebook has taken a different approach to advertising in that Google focuses on “search ads,” which may be directly measured. Facebook on the other hand focuses on “display ads, which aim to influence people’s impression of a company the way magazine or television ads do.” They also point out that display ads are growing faster then search ads.

So, what does this mean for the customers who buy these ads? Since Facebook is becoming more and more of an online presence, if you are a customer, this provides a potential alternative to Google. Classically, Google holds second-price auctions for keywords that customers bid on, and the highest bidder pays the second-highest price. Instead of being stuck buying keywords from Google for search ads though, maybe it is more worth it to increase the public’s view of your company, as Facebook’s ads can provide. Facebook has taken a very different approach to advertisement, in that it gives customers the ability to either advertise a product, or the company’s image. For many companies, it is the case that advertising their image is more important. This, combined with the growing user base of Facebook may make an ad on Facebook more valuable to a customer then a Google search ad. Additionally, the incredible growth of mobile devices on the web may make an ad on Facebook more valuable since Facebook has adapted to the age of mobile devices, and has done so much to master and keep mastering ads that are successful on all platforms, desktop and mobile. Perhaps Google’s slowed revenue growth is due in part to this difficulty in adapting to mobile ads, which makes their ads less valuable to customers, and in part is due to their services having less value during the second-price auctions, since the customers know they have an alternative. This both emphasizes the purpose of Google using these second-price auctions, since they do not know the values of every keyword, one of the reasons being because the values can change, like in this instance where mobile platforms as well as competitors have altered the values of the keywords. It also works against them, because something completely out of control, like another company and changes in the ways people access the internet, like mobile, can affect their revenue so easily.


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November 2014