The hot name in Internet advertising right now is Facebook Inc (NASDAQ:FB). The social media company is finally coming into its own, and it is certainly going to be a more powerful force in advertising going ahead. Facebook has one major problem, however. The king of Internet ads, Google Inc (NASDAQ:GOOG), is improving faster than should reasonably be expected from the king of the hill.
Google Inc (NASDAQ:GOOG) is the leader in the Internet space. There is absolutely no disputing that fact. When companies get to the top and stay there for a number of years, they have a habit of fusing in places and becoming less able to deal with change. It doesn’t look like that’s happening at Google Inc (NASDAQ:GOOG). That leaves a much more difficult job for Facebook Inc (NASDAQ:FB).
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Google on the offensive
Google Inc (NASDAQ:GOOG) is still innovating in its core business, as well as elsewhere. The firm made some key changes recently with the introduction of the Hummingbird algorithm. Victor Anthony of Topeka Capital Markets took a look at some of the recent changes and picked one out as a driver of growth.
According to Mr. Anthony, the removal of keywords from referral data on organic searches is likely to move “more advertisers towards paid search, increase competition, inflate CPCs, and lead to greater revenues for Google.” That’s not the only example of recent Google Inc (NASDAQ:GOOG) search and ad innovation.
Over at BMO Capital Markets, Daniel Salmon wrote a report about the Advertising Week presentation from Youtube brand development head David Mogensen. Mogensen is big on the concept of choice-based ads, and the Google Inc (NASDAQ:GOOG) Engagement Project.
Engagement at Google
For Mogensen, engagement with advertising can be pushed by allowing users to pick which ads they want to watch and collecting that data. Engagement makes advertising more effective, which in turn increases the cost of advertising.
If Google Inc (NASDAQ:GOOG) can push its platforms toward better advertising and push advertisers in the same direction, it may result in meaningfully improved revenue and margins at the company. Google Inc (NASDAQ:GOOG) has access to a huge amount of data, and the company is good at leveraging it.
For Facebook Inc (NASDAQ:GOOG), the news that there is still green shoots at Google Inc (NASDAQ:GOOG) is discouraging. It means the company will not be given easy access to advertising dollars. Menlo Park will be watching Google every step of the way.