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TheStreet Open House

How Facebook Is Eroding Google's Dominance in Online Advertising

Stocks in this article: FBGOOGLTWTRP

"Over time, as they amassed more and more information about who is likely to be interested in what, they got better at targeting with both desktop and mobile ads," Jay Hallberg, industry specialist and co-founder and COO of IT social network SpiceWorks, told TheStreet, recounting his early forays into Facebook advertising as unsuccessful. "As an advertiser, they've certainly been improving their products to drive results for us."

"They have had a big focus on quality more than just quantity, so I think that's why they have that growth there," agreed eMarketer analyst Martin Utreras, speaking with TheStreet. "They're not yet monetized to the [highest] levels, so there's lots of potential behind them."

Facebook's growth also lies in the changing relationship we have with the Internet. Google, once the initial jump-off of any Web experience, is slipping in its place as the only starting point. "People are spending time on Facebook and Instagram. People are spending time in a lot of places that Google isn't," said Hallberg.

Read More: Why Alibaba's Accounting Woes Won't Derail the IPO Train

Facebook is taking advantage of its migrated audience with new initiatives to ramp up advertising revenue, said Utreras. Video advertising (a segment expected to grow 26% in 2015 to $7.11 billion) is a key focus with its recent acquisition of video ad tech developer LiveRail and as it slowly rolls out multimedia formats across its platforms. Instagram, too, is underutilized in terms of monetization with Facebook preferring the slow introduction of advertising lest it suffocate organic content.

"There still is that rising tide," added Hallberg. "Overall digital advertising is increasing 15-20% year over year so that money is flowing into the market but, whereas in the past that would have flowed heavily to Google, it's now... going to Facebook.

"If Facebook didn't exist, that money might have gone to Google."

--Written by Keris Alison Lahiff in New York. 

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