Zacks Investment Research | Jun 17, 2018 09:43PM ET
Digital advertisements have been gaining widespread popularity since some time now. This can be primarily attributed to low costs and an algorithmically narrowed target audience compared to television advertisements. Per a recent report by Magna Global, digital ad spending will constitute almost 50% of total spending for advertisements in the United States in 2018.
In such a scenario, companies offering digital advertisement platforms have been witnessing a surge in demand for their offerings eventually adding to their top-line growth.
Google & Facebook’s Waning Dominance in Digital Ad Spending
The most prominent names in this space are Alphabet’s (NASDAQ:GOOGL) Google division and Facebook (NASDAQ:FB) , given their market share in digital advertising spending, which surpasses that of the other players combined together.
However, it is important to note that the combined market share is expected to witness a decline in 2018 per a recent report by eMarketer. The share of the two companies in the digital advertising spending, which was recorded at 58.9% in 2017, is expected to decline to 56.8% in 2018 and to 55.6% in 2020.
eMarketer also forecasts digital ad spending to reach $273.29 billion in 2018 and $357.31 billion by 2020 from $232.27 billion in 2017.
Notably, Facebook generated around 98% of its total revenues from advertising in 2017. In comparison, , Google’s ad revenues contributed to 86% of its total revenues during the same period. Both the companies registered year over year growth in advertising revenues.
However, in a situation where spending for digital advertisements is poised to increase, declining share of Facebook and Google is an area of concern for these Zacks Rank #3 (Hold) companies. This is all the more true as the advertising segment is the largest revenue contributor for both the companies.
Is Amazon Stealing Share?
Amazon (NASDAQ:AMZN) seems to be the underdog in this domain and can turn into an indomitable force given its huge base of online shoppers.
In first-quarter 2018, Amazon recorded revenues of $2.03 billion at its “Other” segment, which primarily consists of sales of advertising services. This figure marked a whopping year-over-year increase of 130%, much higher than Facebook’s 50.1% and Google’s 23.5%.
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