Google's 2020 ad revenue will dip 5.3% due to COVID-19, eMarketer says

Dive Brief:

Google's net U.S. digital ad revenue is predicted to decline for the first time since tracking began, dropping 5.3% to $39.58 billion by the end of 2020, according to a new eMarketer forecast shared with Marketing Dive. Google's share of the U.S. digital ad market this year is predicted to drop to 29.4%, from 31.6% last year.
Facebook and Amazon are both expected to see an increase in their net U.S. ad revenues this year even as the COVID-19 pandemic undercuts the size of the overall digital ad market, which is forecast to grow just 1.7% for a total of $134.66 billion.
Facebook's net U.S. digital ad revenues are expected to swell 4.9% to $31.43 billion, primarily led by growth at Instagram. Facebook's share of the digital ad market will grow from 22.7% in 2019 to 23.4% in 2020. Amazon's net U.S. digital ad revenues are forecast to gain 23.5% to $12.75 billion, increasing the platform's market share from 7.8% to 9.5%.

Dive Insight:

EMarketer's latest forecast underscores a growing trend around the importance of Facebook and Amazon in the online ad business that Google has historically dominated. It also highlights how the pandemic may be accelerating that trend. A previous eMarketer forecast from Q1 before the pandemic hit predicted Google's U.S. ad revenue would grow 12.9% while its market share still dips a bit.

As Google's U.S. net search ad revenues drop 7.2% this year, so too will its share of the search ad market, which is expected to decrease from 61.3% to 58.5% year-over-year. While Google's dominance slips, search advertising on Amazon is still expected to grow robustly this year thanks to the fact that the platform does not rely on travel, an industry that's taken a hard hit during the pandemic. Travel-related search ads have traditionally had a big presence on Google, per eMarketer.

The pandemic has also impacted paid search because of how it is driving e-commerce sales as consumers look to stay home and avoid stores. As Amazon's struggled to meet the high demand for e-commerce, it reportedly removed its search ads from Google, according to eMarketer.

On the other hand, the pandemic has also driven usage around digital video, which could attract more ad dollars as a result. EMarketer expects YouTube to grow this year and help drive ad revenue for Google. However, search still accounts for the majority of Google's net U.S. ad revenues and even with the video site's contributions to ad revenues, this is not likely to be enough to counterbalance the expected losses.

Google, Facebook and Amazon together make up what's known as the digital ad triopoly as they dominate such a large percentage of the overall spend in this space. However, eMarketer also forecasts that the triopoly's share of the overall market will gain just 0.2 percentage points in 2020, the smallest gain in a decade and pointing to strength in the market's long tail.