Travel Industry Hitting Google Ad Revenue
With the coronavirus wreaking havoc on many aspects of the economy, one area in particular that has shown consistent strength is set to experience its first drop.
According to research firm eMarketer, Google's advertising revenue is set to decline this year for the first time since it began tracking the metric in 2008. eMarketer is predicting Google's U.S. advertising revenue to drop by 5.3% to $39.58 billion from $41.80 billion in 2019.
"Just like the 2008 financial crisis, the entire global economy is hurting, and Google and Alphabet are not immune to the effects of this global pandemic," Google CEO Sundar Pichai told employees in April.
The good news for Google is eMarketer believes the slowdown will be temporary, as it's predicting U.S. advertising revenue to rebound by more than 20% in 2021 and 11.8% in 2022.
The troubling news for Google is that the revenue loss appears to be coming from its search division, as eMarketer predicts U.S. net search advertising revenue to drop more than 7% this year.
Furthermore, it appears Google is losing advertising share to Facebook and Amazon, both of which eMarketer predicts will continue to see advertising revenue increase this year. eMarketer principal analyst Nicole Perrin noted in the report that Google's U.S. advertising revenue has grown slower than the overall digital advertising market since 2016.
Interestingly, Google's slowing revenue from its search business appears to be "primarily because of a sharp pullback in travel advertiser spending, which in the past has been heavily concentrated on Google’s search ad products," according to Perrin.
"Travel has been the hardest-hit industry during the pandemic, with the most extreme spending declines of any industry," Perrin said. "E-commerce-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 e-commerce services."
This shouldn't come as much of a surprise, however, as Expedia Group chairman Barry Diller warned in April that its travel-related brands will significantly slash advertising spending this year.
"At Expedia, for instance, we spend $5 billion a year on advertising. We won’t spend $1 billion on advertising probably this year," Diller said.
For the time being, the market seems to be ignoring Google's declining advertising revenue as Alphabet shares sit just over 5% from all-time highs.
With Facebook and Amazon stealing advertising share from Google, this marks yet another area where the technology giants will continue to slug it out with each other in the years to come.
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