Here is an eye-opening study from ZenithOptimedia about how Google dominates the online advertising industry world-wide — Apparently Google now has about 44% of the advertising market, which is up 10% from 2006, when it was almost 35%.
Google now owns 85% of all searches, which is probably the main reason for the increase in advertising market share. After all, Google makes a vast majority of its revenue from the text ad channel, which works quite well for many different types of advertisers, from mom and pop shops to agencies to direct response clients. Google also continues to drive value to consumers through free products and through searches that maintain the balance between utility and revenue-generation — they are in fact more unbiased than a lot of media outlets these days 😉
The study doesn’t just focus on Google, but also has some macro views of the advertising industry, which predicts overall growth rates of 5% a year through 2014, despite the looming financial crises in Europe and the stagnating economy here in the United States. While this would seem counter-intuitive (why advertise products when less and less of us have jobs or disposable income?), advertisers are apparently sitting on large war chests of savings and are looking to spend money to make money. Additionally, the U.S. has a presidential election year in 2012, and London has the Olympics pending, which will inject more advertising dollars into the mix.
An interesting call-out in the study is that while the traditionally large economies of the United States and Japan are showing some recovery, the big growth is from emerging markets — this mirrors trends in the stock market, which is expected. These emerging markets are actually forecasted to deliver 58% of the lift through 2014 — I can’t help but wonder if they are going to get overheated and expand beyond a point of sustainability. Will there be an ad crash after 2014, especially if the Euro fails and there are less North American and European consumers able to buy products from these emerging markets, or will the growth be self-sustaining as citizens of these countries join the middle class and are able to spend en massse?
The markets in question here are China, Russia, Indonesia, Brazil, South Africa, Argentina, India, Turkey, Mexico, and South Korea. For all of the above, I speculate that political and economic upheaval could upset some of these plans, and I am not as bullish on the growth forecast. For instance, Mexico is practically in the middle of a civil war, wrestling for control with cartels, and may very well capitulate and go back to the status quo (which may cause trade problems with the U.S. as a result). China has yet to hit the real growing pains of their sudden economic expansion, but those times are approaching quickly. Russia is batting allegations of election fraud, and Putin may have a tough 2012 election year on his hands. South Africa also has some long-term structural issues to deal with, as well as a brain-drain. South Korea has the North to worry about.
I find it interesting that the advertising market has done as well as it has in this poor economy (for first-world nations). I question sustainability if Europe and North America do not find long-term solutions for the issues that plauge their economies, but if they do, then the current forecasts will be conservative, and we will see spends shoot up even higher than they are now. I’m keeping my fingers crossed that we will see improvements in 2012 domestically, and that the forecasts next year will prove me wrong (in a good way) for all involved.
Until next time — Glenn Highcove