Reprint of Will Facebook beat Google (in revenue and mindshare)?
There are some very interesting discussions going on here:
http://techcrunch.com/2010/10/02/facebook-bigger-google/
Somehow my comments didn’t show up. So here is my argument against Facebook taking over Google in 5 years:
Advertising Revenue:
1> If you look at the US Internet Advertising Revenue Share http://rajsarkar.wordpress.com/2010/05/07/us-advertising-market-2010/ It actually shrunk in 2009. It is approximately a $23B market with search constituting $10.7B and display advertising constituting $8B. Search grew at 1% and display grew at 4%. Facebook’s advertising revenue growth has primarily come from grasping market share from other websites when it comes to display advertisement (not growth of the TAM). My argument is that facebook’s growth will top off in the near future. I don’t foresee Display growing at the same rate as Search. Facebook is not creating a new advertisement category here like Google did.
2> As a Fortune 500 company you see more returns from your search advertisement than display because search is fulfilling demand while display is generating demand. I bet you will see more and more advertising revenues shifting towards search in the near future. For eyeballs, the big companies will still prefer the traditional mediums like TV, Radio and Newspaper. Just look at the total advertising market in the US which is a staggering $159B.
3> Real time search is the space which will grow dramatically. I already here my friends searching about products on Twitter and what consumers are talking about it. Facebook is limited by the privacy controls and I don’t see Facebook grabbing a huge share in this space. Whereas Google is ideally positioned here with twitter streams already showing up on Google search.
Consumer Spending:
1> Consumers are spending averse when it comes to software or applications on the web. On average a consumer spent around $100 in 2007, which makes this a US $1.6B market primarily controlled by Microsoft and Adobe. (http://rajsarkar.wordpress.com/2010/05/12/consumer-software-spending-2010/) Though the article says that Facebook will use credits etc. to generate revenue I don’t foresee this to become a huge market in the near future. Facebook may grow the TAM a little bit but it would be hard to change consumer behavior.
Business Spending:
1> This is where Google has a huge head start. Already 3 million businesses and 30 million users are using Google Apps. If we look at the total software as a service market in the US: it is a humongous $45B market. (http://rajsarkar.wordpress.com/2010/07/26/cloud-90b-us-market/). I believe that Google Apps can become the next billion dollar business for Google. Businesses will spend online, consumers won’t. Facebook has no foothold in this market and I don’t foresee Facebook being a huge player in this space.
You have to look at this from a numbers standpoint, not a fluff subjective analysis. Unless Facebook changes it business model dramatically in the next few years there is no way Facebook can catch Google.
Filed under: technology, facebook, Google
