Facebook and Google’s Dependence Upon Advertising

Parmy Olson, in an opinion piece for Bloomberg:

But this week marked a troubling difference. Facebook’s announcement that user numbers had dropped for the first time laid bare a long-neglected vulnerability: Digital advertising accounts for 98% of Meta’s revenue, and it also accounts for 81% of Alphabet’s. Of the world’s five biggest tech companies, including Amazon Inc., Apple Inc. and Microsoft Corp., Facebook and Google are the least diversified.

Though conventional wisdom says that conglomerates shouldn’t put all their eggs in one basket, it is hard to knock a business model that has been so successful. After all, people were calling Google a one-trick pony back in the early 2000s because of its bet on ads, and that bet has paid off handsomely two decades later. “Through most of the first decade the concept that Google would make $10 billion was inconceivable to people inside the company,” says Sridhar Ramaswamy, who ran Google’s ad business for about five years until he left in 2018.

It’s a little surprising to me that Google’s ad revenue is down to 81 percent of the company’s total — 10 years ago it was up around 97 percent, like Facebook’s today.

Thursday, 3 February 2022