Google and Facebook Now Make More From Ads Than Every Newspaper, Magazine, and Radio Network In the
This is a story about paying attention to the numbers that really matter--and paying a little bit less attention to the ones that don't.
There was some big news this week about Google: namely the $2.7 billion fine the search and advertising giant might be on the line for with the European Union. A billion here and a billion there, as they saying goes, and eventually you start talking about real money.
But it's worth remembering that the market capitalization of Alphabet, Google's parent company, is more than $639 billion, and so the European fine works out to about 0.42 percent of Google's total value. It's like fining the average American household $336 (based on .42 percent of $80,039).
So, what are the numbers that really matter? Well, there's this one for example, which was reported at the same time: $80.8 billion, which is how much Google will make from ads this year. That's a number that will impact your life a lot more than what Google pays for allegedly gaming search results across the Atlantic.
Half of the world's ad dollars
Big numbers are difficult to visualize, but $80.8 billion is a truly staggering amount--and it's also a staggering share of the global advertising industry.
It works out to $11.54 for every single person on Earth, and it's as much as the combined total ad spend going to every print magazine and newspaper on the planet. It's far more than the GDP of most of the world's countries (although a fraction of the GDP of larger countries like the United States).
Moreover, combine Google's ad take with its only real rival, Facebook, which brings in $36.3 billion, and those two companies alone eat up 83 percent of all new ad dollars, worldwide. (Facebook's ad revenue is about the same as every radio station and network in the world.) The totals were reported by Sara Fischer in Axios, in an aptly-headlined article, Tech giants eating the advertising world.
After the American duoploy, everyone else tapers off quickily. There are Alibaba, Baiduand Tencent, Chinese companies that together account for 60 percent of the advertising industry in that country--and 15 percent of the advertising industry worldwide.
"The 12 companies behind the Big Five -- Yahoo! Microsoft, Linkedin, IAC, Verizon, Amazon, Pandora, Twitter, Yelp, Snapchat, Sina and Sohu -- bring in roughly half of what Google brings in annually in ad revenue," Fischer writes.
The numbers that matter
The European fine is a legitimate news story--the biggest by far ever levied against a company. But perspective matters--and in perspective, even a few billion dollars isn't enough to even slow Google for a minute.
That's why Google can afford to announce, suddenly, that it will no longer mine the contents of Gmail messages in order to serve ads. It simply doesn't need to. And it's why Google can basically announce it plans to create a video ad blocker and build it into Chrome: It simply can.
These are massive announcements, probably worth hundreds of millions or even a few billion dollars--and yet they're small pieces, representing almost negligible percentages of the Google ad machine.
It's hard to imagine any other companies that have ever had such a dominant share of the advertising market--and with it, ultimately, such influence over what people read, consume, and buy. That's why there are bull's eyes on Google's and Facebook's backs, and why we as consumers and investors need to pay attention to the right numbers--and ignore the less-relevant hype.