The mop-up of global ad revenues by Facebook and Google (owned by Alphabet) showed no signs of slowing in 2017 (and in the fourth quarter), despite both tech giants facing growing pressure for the way they display advertisers’ products. All the pressure from media companies (such as News Corp), governments (the UK, Australia, NZ, Germany to name a few) and advertisers and their agencies didn’t hurt Google and Facebook in 2017, who both lifted their combined ad take for the year by 27% to US$135 billion (more than AU$175 billion). Google hoovered up nearly $95.37 billion, up 20% (and a record) on 2016, while Facebook saw faster growth from a lower base — it grabbed a record $40.65 billion in ad revenues last year — that’s a rise of more than 50%. Looking at their performance since 2015, the mop-up is even more startling — in 2015 the two companies had total ad revenues of $84.4 billion, so the rise of the two years has been a breathtaking $51 billion or more than 60%.

Sales for Alphabet also hit a milestone, posting annual revenue of $110.8 billion (ad revenues accounted for $95.3 billion, or more than 86%) up from $90.2 billion in 2016 (when ad revenues of $79.4 billion accounted for 88% of total group revenues). All the talk of sales of software (for Android hones), its own phones and other techie products, Google’s lifeblood is still ad revenues. But ad revenues are the be-all and end-all of the business. The company’s 2017 ad revenues of $39.94 billion accounted for nearly all of the $40.65 billion in total revenues. In 2016, it was a similar story with ad revenues of $26.88 billion making up nearly all group revenues of $27.6 billion.

Governments have tried hurting Google financially. The European Union fined Google $2.8 billion for claimed abuse of the dominant position of its search engine, which Google is appealing. Various governments and regulators have threatened to take action on rankings, on YouTube and on fake news and poor ad placement. Facebook has been facing even more pressure from governments, publishers,TV and other media companies, rival tech companies and from politicians of all stripes. And yet both companies continue to soak up as much ad revenue as they can get their hands on. The pressure gets more headlines and attention and the ad revenue growth continues regardless, and investors know that. It is why Facebook shares are up 45% in the past year and Alphabet shares are up 38%. That’s not to say there are not problems for both companies, but they seem to be mere hiccups compared to the revenue they continue to pull in. Established media and marketing companies moan and moan, but are powerless.

Peter Fray

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