Google’s U.S. Advertising Revenue to Decline for First Time This Year

Google’s U.S. Advertising Revenue to Decline for First Time This Year

What does this bode for the giant company?

Google’s U.S. advertising revenue is expected to drop 5.3% this year, marking the first annual decline for the tech behemoth since eMarketer began modeling it in 2008.

The research firm said the lower revenue can largely be blamed on the deep decline in travel-related advertising due to the global COVID-19 pandemic.

EMarketer forecasts that Google will earn $39.58 billion in U.S. advertising revenue this year, compared to $41.8 billion in 2019. However, the firm expects revenue to recover by more than 20% in 2021 and 11.8% in 2022.

The report noted that Google’s colossal ad business will take a gut-punch as the pandemic continues to hurt businesses in most industries. YouTube’s U.S. ad revenue will continue to grow, but that won’t offset the 7.2% drop in U.S. net search ad revenue expected this year, according to eMarketer.

The market share of three of today’s tech giants—Amazon, Facebook and Google—will only grow by 0.2% this year, the smallest gain in a decade, eMarketer said.

“Google has been growing its net U.S. ad revenues at a slower rate than the overall digital ad market since 2016, so this year will continue a trend of Google losing digital ad market share in the U.S.,” Nicole Perrin, eMarketer’s principal analyst at Insider Intelligence, said in a statement.

Despite the pandemic, Facebook and Amazon’s share of ad spend will see growth this year—though at a much slower rate. Facebook is being supported by the fast-growing popularity of Instagram, while Amazon continues to make inroads into Google’s market dominance.

EMarketer analysts noted that the e-commerce leader is less exposed to the economic impact of the coronavirus.

“Travel has been the hardest-hit industry during the pandemic, with the most extreme spending declines of any industry,” Perrin said.

“Ecommerce-related ad spending has also been dampened to some extent: Amazon reportedly pulled its ads from Google search earlier this year as it struggled to meet customer demand for its ecommerce services.”

In the digital advertising market last year, Google boasted 31.6% of total digital ad spending, with Facebook and Amazon holding 22.7% and 7.8%, respectively, according to eMarketer. This year, Google is expected to grab 29.4% of digital ad spending, with Facebook and Amazon owning 23.4% and 9.5%, respectively.

Google’s parent company Alphabet posted revenues of $41.2 billion in the first quarter of this year.

Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters