Facebook Results Spell Trouble for Other Web Properties

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Facebook Inc. (NASDAQ: FB) results were much better than expected. That is bad news for companies that rely on internet advertising for some or all of their revenue. Along with Alphabet Inc.’s (NASDAQ: GOOGL) Google, they hold 56% of the U.S. online ad market.

Facebook’s ad market share in the United States is about 19% and Google’s is 36%, or about 56% combined, according to eMarketer. Other estimates put the number as high a 70%. As long as the two huge companies have growth for online ad revenue higher than the overall market, much smaller competitors scramble for their own piece of a shrinking portion of the market.

Facebook’s results in mobile were particularly strong. Its total revenue rose 50% for the period that ended March 30 to $11.8 billion. Net income rose 63% to $5 billion. The company’s management announced:

Mobile advertising revenue represented approximately 91% of advertising revenue for the first quarter of 2018, up from approximately 85% of advertising revenue in the first quarter of 2017.

The exodus of consumers from PCs to tablets and smartphones makes the need for growth in the mobile market absolutely essential.

The online ad market’s leaders after Facebook and Google are primarily Amazon, Twitter, the web portals and a number of media companies. At the top of the media company list are CBS, Turner (owned by Time Warner), Time (which was recently bought by Meredith) and Gannett’s USA Today Network.

Companies that need online advertising to support their business models continue to hope that the growth and ongoing dominance of Google and Facebook will slow. Facebook’s results show that process has not begun. As a matter of fact, the two companies may become even more formidable competitors.

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