Google Still Gives The Best ROIs In Online Marketing

  • A recent RBC Capital Internet survey found that online marketing remains highly popular with marketers.
  • Google still ranks ahead of Facebook as the most preferred online ad platform by marketers.
  • Things are likely to remain this way for a long time due to Google's natural advantages as an online marketing platform.

RBC Capital Internet has published the results of its 7th annual survey which found that online marketing is not only one of the most popular marketing channels but that its popularity is growing - 82% of respondents said they expect to increase their online ad spend over the coming 12 months. 57% of 2,000 top marketers surveyed (up from 49% in the previous two surveys) reported that they allocate at least 20% of their marketing budgets to online channels with 23% saying they allocate more than 50% of their budgets to online. Another big takeaway from the survey is that Alphabet Inc-C (NASDAQ:GOOG) still gives the best ROI (Return On Investment) among all online ad platforms, with 31% of marketers saying they spend more than 30% of their marketing budgets on Google ads. Additionally, 42% of marketers said that their ROI on Google had improved over the last 6 months.

Facebook (NASDAQ:FB) was ranked a close second with 28% of marketers saying they dedicate at least 30% of their marketing budgets to the platform. Google’s YouTube was ranked third with 76% of marketers saying they allocate at least part of their marketing spend to the platform, up from 72% in the previous survey. 12% of marketers said they spend at least 20% of their ad budgets on the online video channel compared to 10% of marketers the previous year.

When it comes to giving the best ROI, Twitter (NYSE:TWTR) and LinkedIn (NYSE:LNKD) ranked in the middle of the pack while Yahoo (NASDAQ:YHOO) and AOL brought up the rear.

The #1 Reason Why Google Still Ranks Above Facebook

Perhaps Facebook investors will be surprised that most marketers still pick Google over Facebook as their preferred online marketing platform. After all, Facebook has made tremendous progress since a 2013 Forrester survey where marketers ranked FB at the bottom of the pile in their preferred online marketing platforms, behind even the likes of Twitter and Google Plus.




Back then, marketers ranted that FB was not doing much to use its massive cache of user data in ad targeting thus leading to a poor ROI for marketers. Since then Facebook has improved its targeting methods so much that it ranks as one of the handful of online platforms whose ad rates (CPC and CPM) are still growing. 59% of marketers in the RBC survey reported seeing an improvement in ROI with Facebook ads over the past 6 months.

During Q4 2015, Facebook posted an impressive 57% Y/Y growth in ad revenue to $5.637B, with global CPM rates up a massive 45% Y/Y.


Source: Web Pro News

In contrast, Google’s aggregate cost-per-click, or CPC rates declined 13%. The problem here is that Google search ads are getting saturated. Search ads have better engagement than display ads and command better ad pricing. As Google continues to increasingly rely on display ads on YouTube to drive its top line, its ad rates are bound to keep falling. Google, however, is able to offset declining ad rates by a bigger increase in ad volume.

Meanwhile, Nanigans has reported that Facebook’s Dynamic Ad Products that use ad retargeting are responsible for the surge in ad revenue. According to the report, the number of marketers using Dynamic Ad Products surged 210% during the last quarter. Facebook’s carousel ad format that allows marketers to display 3-5 images and videos in a single ad unit is also proving to be a hit with marketers.

Despite these advances by Facebook, Google still holds some natural advantages that are likely to maintain its spot as the most preferred ad channel for marketers. Facebook is a social platform where people primarily go to connect and share with friends. People do not go to Facebook expecting ads to be shoved into their faces. In fact, users consider Facebook ads as an antisocial offering on the social platform. Facebook, therefore, has to perform a delicate balancing act where it limits the number of ads displayed to users but at the same time keeps its ad load factor high enough to keep marketers happy and, of course, to ensure its business keeps growing.

Google, on the other hand, enjoys a free rein when it comes to ads. People tend to be much more open to Google ads. People mostly use Google for search. Google displays ads mainly in response to users’ search queries. Users, therefore, tend to view Google ads as a natural and even helpful part of their search processes. Google sites can, therefore, sport a much higher ad load factor than Facebook. Marketers are therefore likely to realize a higher ROI by advertising on Google than they would on Facebook. This natural advantage for Google is also primarily the reason why Google’s ad revenue is almost four times bigger than Facebook’s.

Investor Takeaway

Despite Facebook’s increasing popularity as an online ad platform, more marketers still prefer Google due to its higher ROI. Google sites are simply better geared for the business of online marketing while Facebook has natural limitations due to its nature as a social media platform. This gives Google ample growth runways.

Brian Wu Brian Wu   on Amigobulls :
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