Google continues to gobble up online ad revenues

Google is expected to have extended its lead in the global search advertising market in 2010, despite competition from a variety of sources.

The search engine firm will release its fourth quarter and full year earnings for 2010 any minute now, with research from IHS Screen Digest estimating that advertising revenues will jump from $21.1 billion in 2009 to $25.4 billion in 2010, despite losing ground in the Asian markets coupled with the threat posed by Microsoft’s Bing.

This means that Google is now expected to own an 83 percent market share, rising from 81 percent in 2009, with total revenues expected to total $28.9bn, an increase of 22.5 percent from the previous year.

It is noted that with the arrival of Microsoft’s Bing and rising competitive obstacles in fast-growing regions including China, Russia and South Korea, it seemed that Google may end up losing some of its dominance in 2010 with regards to the global search advertising market, according to Vincent Létang, senior analyst and head of advertising research for IHS.

“However, even amid these challenges, Google managed to outgrow the overall market. What makes Google’s outperformance even more impressive is that it came during a year when the overall market revenue rose at an impressive double-digit percentage following a slowdown in 2009,” he said.

The market as a whole saw an increase in advertising revenue up 17 percent from $26bn in 2009 to $30.4bn, highlighting accelerated growth following the global economic downturn.

Google’s display revenue was also a contributing factor to its success up an estimated 61 percent, boosted by subsidiaries YouTube and DoubleClick.

One of Google’s successes in 2010 was to see off the challenge from the heavily promoted Bing, which only really saw growth at the expense of Yahoo Search, having little effect on Google’s share.

Certain markets have been a thorn in the search engine’s side this year with, with local operators such as NHN, Yandex and Baidu controlling parts of the world. 

Baidu’s control in particular represents lost ground for Google in the important Chinese market, after the breakdown of the relationship with the Chinese government early in 2010 meaning that Google lost significant market share.

However Google decided to stay in the local search market, leading to 60 percent growth in 2010.

Interestingly IHS Screen Digest highlight the rise of social media as the main threat to Google in the future, particularly from Facebook:

“Microsoft and Facebook recently have deepened their own alliance in search, with Bing now providing sponsored links on Facebook searches and Bing to integrate social results powered by Facebook,” Létang said.

“The association of Microsoft with Facebook and its 500 million-plus users is, in our view, a much bigger threat to Google’s dominance of the Internet than the Yahoo-Microsoft deal or the company’s legal issues. Social networking is the only major Internet trend where Google has failed to make its mark by either acquiring or developing strong products, despite semi-failed short-lived attempts.”

It was also noted by Létang that Facebook was estimated to have global advertising revenues at around $1.2 billion for the first nine months of 2010, with the company firmly establishing itself as a cost-effective marketing destination for many major brands.

It is said that by providing similar scalability and accountability along with more focused targeting, social marketing may become a viable alternative to both search engine marketing and display.