Why Facebook poses a far bigger threat to Google than Amazon

Amazon might be issuing a strong challenge, but when it comes to advertising, Google’s biggest rival is Facebook.

Yesterday, it was reported that Amazon would soon be launching “Sponsored Links,” and advertising platform that would allow brands to advertise their products in relevant spaces across its network of websites. Along with Facebook, Yahoo, and Bing, it joins the ever growing list of networks competing with Google for search and display ad dollars. 

Google has long been the dominant platform for online advertising, mostly on the strength of its AdWords and AdSense tools for advertisers. Its historical strength lies in the sheer volume of people using its search engine and the massive reach its ads had among its network of blogs and websites.

Now that reach is being challenged by both Amazon and Facebook. The advantage both those platforms have is not only the huge visitor numbers, it’s also the very rich and relevant data it has on them. Google might have the information on what you’re browsing, but Amazon knows what you’re buying, which is arguably more valuable to retailers. And Facebook just plain knows everything about you.

Put Facebook’s huge reserves of personal data along with its one billion strong user base, and you have a very attractive pitch for advertisers. Amazon too has the numbers and the data, but it might not be as lucrative a platform for advertisers simply because they’ll have to compete with Amazon itself for prime ad space on its network.

“Amazon tends to keep the good inventory to itself and only sees ad inventory when it doesn’t think it can better monetize space directly,” says David Rodnitzky, CEO of the search marketing agency 3Q Digital. “I would assume that Amazon would take the same approach to an external network – bidding against advertisers and reserving the best inventory for itself.”

Rodnitzky says Facebook’s data reserves extend far beyond its user base, making it even more potent. 

“Facebook has reams of data from both on-Facebook behavior and from third parties that use Facebook connect for registration,” says Rodnitzky. “Combine this with the fact that Facebook is not a competitor to the people it is trying to sell advertising to, I think Facebook poses a far more realistic threat to Google’s AdSense network than anything Amazon might concoct.”

Let’s not forget, it isn’t just display ads where Facebook poses a threat. It recently acquired programmatic video ads platform LiveRail, kicking its video advertising into high gear. That’s an area that Google hasn’t been very proficient, depending mostly on YouTube to bring in the video ad dollars. 

If Google won the advertising war on desktop, the next battlefield is going to be on mobile. While Google currently owns 50% of the mobile advertising market, Facebook is rapidly catching up. It now has 17.5% of the market share, and it really only started investing in mobile less than two years ago. Much of Google’s market share is because of Android OS, now the leading operating system for mobile phones in the US. However, with its attractive new ad products such as auto-play video and call-to-action display ads, it won’t be long before that position is being seriously threatened by Facebook.

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