Why Google is getting schooled by Facebook in display ads, and what it’s doing about itOctober 27, 2015 | By Fluent
Publication date 10/22/15
Several research reports this month have pointed out that Google’s display ad business is growing far more slowly than Facebook’s.
Most recently, IgnitionOne’s Q3 Digital Marketing Report said that Google’s display business dropped 19 percent from last year’s third quarter to this year’s, while Facebook’s share of display advertising spend increased by 40 percent.
In short, the reason Facebook display ads are growing faster than Google’s is that Facebook has been able to “clone” audiences of people who have already bought the advertiser’s product.
With Facebook’s Custom Audiences product, advertisers upload a list of their existing customers from their CRM, then Facebook goes out and finds people with the same demographic and social characteristics. Facebook then delivers ads for the relevant products to these users’ desktop or mobile devices.
This strategy has resulted in far higher click-through rates for advertisers.
“Facebook has been gaining against Google because it is able to execute people-based marketing programs for its advertisers,” said Jordan Cohen, CMO ofFluent, an advertising technology and brand marketing firm. “It enables deterministic, cross-device targeting of logged-in individuals, as well as the ability to target custom audiences leveraging its advertisers’ existing CRM databases and 1st party data…”
Cohen said this approach has been producing stronger overall results for advertisers, meaning higher response rates and lower cost of customer acquisition.
Of course, Google has been under pressure to come up with an answer to customer cloning, and at Advertising Week in New York last month it announced a new product called Customer Match. Customer Match does basically the same thing as Facebook Custom Audiences, but with slightly different data sources.
Customer Match allows the advertiser to upload email lists of current customers, then finds logged-in Google users that look similar demographically. Google then delivers ads to those users across Google’s various properties, like YouTube, Search, and Gmail, and across desktop and mobile devices.
“‘Customer Match is an effort to stem the bleeding here and should position them to regain some momentum in Q4 and beyond,” Cohen said.
Google’s parent company, Alphabet, reported its earnings today. The company doesn’t break out display advertising revenue numbers, but it does report total advertising sales. Revenue for the third quarter of 2015 was $16.8 billion, a 13 percent increase over the same period last year, and a 5 percent increase over the second quarter of this year.