First time for everything: Google's ad revenue will fall in 2020

According to eMarketer, Google will see its U.S. advertising revenue fall in 2020. This will mark the first time ever since the market research company started tracking the search giant in 2008, The Wall Street Journal reported.

Travel-related woes

The Alphabet Inc (NASDAQ: GOOG) owned property is likely to see its U.S. ad revenue fall 4% in 2020 and net U.S. revenue (accounting for payments made to website owners for traffic) will be down by 5% this year. The U.S. advertising market is likely to see a 7% decline this year, implying Google will fare better than the overall industry.

The ad market will be impacted by travel-related companies scaling back their ad campaigns as the COVID-19 pandemic paralyzed the global tourism industry. 

Companies like Expedia and its rivals typically spend billions of dollars on Google’s search platform. But according to eMarketer principal analyst Nicole Perrin, the travel company made it clear it is pulling back spending on Google and search for the rest of the year.

The loss of Expedia is significant for Google as Expedia ranks as one of its largest advertisers on the search platform.

Google, along with Amazon and Facebook, will see their combined market digital advertising market share rise from 62% to 62.2% in 2020. But unlike Google, Facebook is expected to show a net U.S. revenue growth rate of 5% in 2020 to $31 billion.

According to eMarketer, Facebook continues to offer what advertisers seek: a “huge reach, effective targeting at scale and performance ad products that tie spending to results.”

Not a near-term trend

One would assume the travel and leisure industry would pick up once the pandemic eases -- whenever that might be. But this isn’t the case, at least according to Expedia CEO Peter Kern.

The Expedia executive said during its May earnings conference call the COVID-19 pandemic is seen as an opportunity for “an entire reset” of how it approaches its marketing strategy, according to WSJ.

This may not be entirely surprising as Expedia publicly raised concerns with Google’s rival travel products in the past prior to the pandemic. Expedia’s ex-CEO Mark Okerstrom said in late 2019 Google isn’t playing on a “level playing field” as it accepts billions of dollars from Expedia and others while simultaneously operating a rival platform on its own engine.

The sentiment remains the same under Kern’s leadership but he isn’t eager to return to the prior status quo anytime soon.

“As we wade back in, we’re able to be more precise, be more constrained, watch and learn and grow into it, and not just dive back in head first and spend back to the levels we were at,” he was quoted by WSJ as saying.