Video, mobile, and social spending were the strongest drivers of growth of Europe’s digital advertising market, with video accounting for over one third of total display spending in 2018, and mobile equaling almost half of total spend in display advertising, both being greater than many other regions. Two major companies of focus in the U.S. that represent good case studies of how companies are generating revenue through online advertising are Facebook and Google, both of which have seen great increases in their revenue in recent years.
- The digital advertising market of Europe grew to $62.43 billion in 2018, the third largest regional market in the world after North America and APAC.
- The leading European-level industry association for digital advertising known as IAB Europe, stated in 2019 that digital advertising grew 13.9% in 2018 to €55.1 billion, with video, mobile, and social spending being the strongest drivers of growth. This is the quickest growth of the market since 2011, with the market more than doubling since 2012.
- Both mobile and out-stream video topped the list in 2018, as each grew by double digits. On average out-stream video grew by 44.7%, over two times as fast as the 19.7% of in-stream, with video growing by 30.9% overall and up to €7.6 billion, equal to 33% of the display market.
- In terms of revenue, with a growth rate of 12.5% and a value of €25 billion in the market, search remains the largest online advertising category.
- Social advertising is driving display growth across Europe, causing a growth of 33.7% year to year, and accounting for 49% of the total display market.
Mobile Search Spend
- According to Dr. Daniel Knapp, Chief Economist, IAB Europe, “Mobile, video and social continue to drive growth across the region, with mobile now closing in on 50% of both display and search, and video accounting for a third of all display.
- Mobile display spending is dominated mostly by countries of Western Europe, the UK in particular, accounting for €4,759 million of the total, equaling almost four times as much as Italy, the second biggest spender with €1,051 million.
- This growth of mobile display spending is driven largely by the continual growth of social media and improvement in targeting options that come with it. 45 % of EU companies used social media to develop the company image or market their services and products. The general increase of pages that are optimized for mobile devices from has played a part as well, along with ad campaigns being used to drive app installs. Apps for gaming were a particularly strong growth driver for mobile display, with developers continually reporting large gains.
- Mobile continued to drive growth in 2018 with mobile display advertising spend growing by 34.2% overall up to €11.4 billion, meaning mobile equaled 48.9% of total spend in display advertising.
- Mobile also grew 28.6% in the search space to total €11.6 billion, increasing the market share of 5.8% on 2017 (from 40.5% to 46.3%). Although this is a lower share of the market than in mobile display, still it equals €0.2 billion more in spend due to the larger market size.
- Video advertising spending, including advertising for in-stream, out-stream and in-feed, had a growth in the year of 2017 to 2018 that was more pronounced than the market in whole, increasing its market share of the display market from 12.1% to 13.9%.
- Driving the growth in video was out-stream advertising which grew 73.4%, in comparison with in-stream video at 6.9%.
- Video helped the total display market gain 1.3% of the total market share. Growth in display spend was concentrated on video during the year 2018, growing 30.9%, and almost three times as fast as the rest of the display market.
- Video grew to account for 32.8% of total display spend across Europe, keeping with the general trend of the last five years, where video has been the main driver of growth for the display market. Further growth drivers include a variety of factors, such as easier access to more content on mobile devices, to inventory increases of programmatically traded video, as well as increases in brand advertising spending.
- Western European countries are at the top when it comes to nations that are driving digital video advertising spend, being led by the UK, France, Italy and Germany, with Russia being the only non-Western European country placing in the top 5.
Companies Driving U.S. Browser Revenue Growth
- According to Facebook’s 10-K filing with the U. S. Securities and Exchange Commission (SEC), the acronym ARPU is used as average revenue per user. With over 2.5 billion monthly active users globally and the average revenue per user (ARPU) in 2019 was estimated at $8.52.
- Facebook’s purchase of WhatsApp with over 1.5 billion monthly active users, means an even greater number of people to sell as a unit to companies looking to advertise digitally. All of Facebook’s acquisitions, including Instagram for $1 billion or WhatsApp for $19 billion, were acquired with the same goal of increased advertising among others.
- In January 2019, Facebook ad revenue reportedly topped $16.6 billion, driven mostly by Instagram, and Facebook Stories.
- Reports from Bloomberg state that Instagram alone brought in $20 billion in advertising revenue last year, more than a quarter of Facebook’s 2019 total revenue.
- Facebook has monetized Instagram by building a product that gives companies and brands the means to sell items directly from the app. Facebook also seeks to play a larger role in content deals for influencers as the company recently gave creators access to a company product aimed to help coordinate brand deals. The company will most likely continue to design tools for creators while providing metrics for brands.
- Most of Facebook’s revenue generates from selling advertising to marketers, which are then displayed on Facebook’s main site, as well as Messenger, Instagram, and other affiliated websites or applications. Ads are paid for based on the amount of impressions or actions, such as clicks, generated by users.
- In 2018 Facebook posted $55 billion in revenue from advertising, 98.5% of the total revenue earned by the company. This revenue grew 38% through the year of 2018, (as compared to 2017 at 49%) and in 2019 the first three quarters saw ad revenue grow by 27%.
- Google’s parent company Alphabet had 2019 revenues of nearly $162 billion, with Google advertising accounting for $134.8 billion, and YouTube $15 billion, for the year.
- The top three digital ad platforms are Google, Facebook, and Amazon, but Google’s $134.8 billion ad revenue in 2019 is nearly twice that of Facebook’s of $69.7 billion. Amazon’s 2019 total ad revenue of $14.1 billion was less than YouTube, which alone had $15 billion.
- Google acquired YouTube in 2007, now the second-most popular site on the internet behind Google.
- YouTube alone is larger than newspapers, consumer magazines, trade magazines, out-of-home, yellow pages and others, with only traditional TV, radio (barely), and digital as a whole being larger. YouTube generated $4.7 billion in Q4 alone, claiming 1.5 billion monthly active users, along with more ad units, including shopping ads.
- Google generates ad revenue through its Google Ads platform, allowing advertisers to display ads, products, and services across Google’s vast ad network (including properties, partner sites, and apps).
- Google, having long been the most visited site on the internet, has also acquired other companies, from blogging services to YouTube, with Google’s technology even powering rival company search engines such as Yahoo, who relied on Google for almost four years until 2004.
- The main way Google generates advertisement revenue is through two services known as Ads and AdSense. With these, Google aims to give advertisers placements that are targeted directly to the users most likely to buy the product or service, and to give users the most relevant information for what they’re seeking.