Facebook and Google Advertising - Where Does the Money Go?

As an online business, running ads on Facebook and Google is undoubtedly a vital extremity to succeed in the competitive digital landscape. Building a robust digital presence is a promising strategy to make sales, right? Initially, the prospect of running online ads appealed to many businesses — who wouldn't capitalise on the opportunity to bring in new customers with a single click? But what if you only had two options to do that? You'd quickly find out this is false, yet, somehow, the status quo.

A Tale of Two Giants

The startling truth is that for companies to succeed, they need to climb into bed with two giants: Facebook and Google. Otherwise, there's little opportunity for people to find a company's promotional content.

As your company allocates funds to broaden your reach and target new customers, who are getting the lion's share of your investment?

In the final quarter of 2019, Facebook brought in over A$26 billion from ads, and Google doubled that at A$51.3 billion. Compared to other smaller ad channels like Twitter and Pinterest, there's no comparison to the total revenue of these internet Kings.

How do these figures compare to what companies are spending on ads? Let's break down Facebook and Google advertising and reveal where the money goes.

First: a brief explanation of each advertising channel.

• Google Ads, also known as pay-per-click (PPC) advertising, means that businesses run ads for products and services and pay for each click they generate to their website.

• Facebook Ads involve a social media targeting method that advertises a business's goods and services to social media users.

With that out of the way, how much money goes into these sales channels?

How Much Do Businesses Spend on Ads?

So far, we've learned that accumulatively, Facebook and Google are banking billions in ad revenue. "Billions of dollars" is an intangible overhead figure, so let's deconstruct it by how much businesses spend on online ads, starting with Google. Fair to say, the stats are nothing short of mind-blowing.

Google Ad Spending

• Google owns 73% of the paid search market, according to eMarketer 65% of small and midsize businesses use Google Ads or PPC campaigns

• Companies spend on average A$14-16 thousand monthly

What's the bottom line we can deduce from these stats? That Google dominates the online ad market, most companies pay to play, and they're forking out seven to eight figures a year for PPC ad campaigns. How does Google stack up to Facebook?

Facebook Ad Spending

• More than 7 billion businesses used Facebook advertising in 2019

• There are 2.5 billion active users on Facebook every month

• 93% of business marketers use Facebook advertising

To summarise: Facebook's user network makes up roughly 32% of the global population, and most businesses are using Facebook ads to reach them.

Why are marketers furnishing hefty funds to Google and Facebook? The answer is simple: the majority of the global population are spending time online. From television to online ads to billboards and social media, the average consumer ingests around 4,000-10,000 ads a day.

Can you guess where most of the ads come from? If you answered Facebook and Google, you are correct. But let's widen the lens a little because Facebook is only an umbrella hovering over a handful of acquisitions, and the same goes for Google.

How Many Companies Do Facebook and Google Own?

A lot. Why is this important? Because when we talk about Google Ads and Facebook Advertising, we're not just summarising two entities. No, we're tackling monopolies. Have a look:

Facebook Owned Companies

• Instagram

• WhatsApp

• Oculus VR

• FriendFeed

• LiveRail

• + dozens of others

Google Owned Companies

• Google Ads

• Google Cloud (GSuite)

• YouTube

• Android

• Google Pixel, Chromecast, and ATAP

It's safe to assume that the ubiquitous omnipresence of these two tech giants is all-encompassing. And their collective assets and revenue remain dominant in the online advertising market.

Total Google and Facebook Ad Revenue

We briefly mentioned quarterly revenue, now let's look at the annual.

Facebook garnered A$87.6 billion in 2018 and Google climbed to A$214.53 billion,

according to Statista.

How much of the revenue came from ads? For Facebook, advertising made up 98.5% (basically all) of global revenue in 2019. Google Ads accounted for 97% of the corporation's total revenue, according to Google Investor Relations.

Bottom line: ads fuel the machine, but what are Facebook and Google spending money on?

Facebook and Google Ads: Where Does The Money Go?

For Facebook, the majority of its revenue funnels into its subsidiaries. This makes perfect sense because Instagram is a profitable advertising platform, and that's only one subsidiary. Given the rise of influencer marketing, business marketing and Stories Ads, there's no stopping the growth of Facebook, Inc. via advertising. Also, Facebook spent 3.7 million on safety and security in 2019, and rightfully so considering the platform's controversial safety breaches.

What does Google spend money on? In 2019, Google spent A$20.5 billion on U.S. offices and data centres. What are those? Mainly, Google spent money on building hubs in 24 U.S. states. The distribution of this investment goes to infrastructure and hiring. In other words, Google is bleeding funds into expansion, spending upwards of A$48.8 billion, that's over a quarter of global revenue for the company. But don't let these sizable numbers fool you. There is competition creeping in too close for Google's comfort, and it's called Amazon. Google has spent billions of its revenue in a race against Amazon and Apple to pioneer the smart home.

Safe to say, Google and Facebook have no problem spending billions to make billions. And that's why these two giants reign.

The massive A$474 sum that marketers and businesses spend on Facebook and Google ads pour directly into the expansion and total domination of these tech giants.

Have a problem with that? Fortunately, businesses have the power to change the market significantly by advertising on other platforms like Pinterest and Twitter. Additionally, boosting SEO initiatives, social media activity and an online presence can bolster organic web traffic, effectively moving money from the corporate bank accounts of Google and Facebook and into your business's earnings.

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