Google still dominates advertising but Facebook is on the rise

Google has been criticized lately for a decline in the quality of its search results, but that hasn’t stopped it from continuing to dominate the market in search advertising with 83 percent market share, according to a new research report from IHS Screen Digest. Its only real rival is likely to come from social media.

The report estimates Google’s market share of search advertising at 83 percent in 2010, up from 81 percent in 2009. According to the report, Google’s full-year search advertising revenue in 2010 amounted to $25.4 billion, an increase of 20.2 percent from $21.1 billion in 2009. Google’s official earnings results for the fourth quarter of 2010 will be announced tomorrow.

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Google’s revenue growth was even stronger in display and mobile advertising. Display revenue increased by an estimated 61 percent during 2010, boosted by the success of Google’s subsidiaries YouTube and DoubleClick. On the mobile ad side, Google benefited from the increasing popularity of the Android operating system and the AdMob acquisition.

In 2010, Google faced the first major challenge to its search business in many years with the launch of Microsoft’s Bing. However, Google has so far lost little or no ground. Bing grew mostly at the expense of its partner Yahoo.

The report predicts that the only real threat to Google is social media, rather than competing search engines. Facebook’s global advertising revenues were estimated at $1.2 billion for the first nine months of 2010. By providing a similar scale, low cost and more focused targeting to advertisers, social advertising could become a viable alternative to both search engine and display advertising. Bing already has a partnership with Facebook where Bing highlights search results endorsed by your Facebook friends and multiple startups are also working on social search.

While Google remains the undisputed leader in most major markets, there are some notable exceptions including South Korea, Russia and, most importantly, China. In these markets, the dominant search engines belong to local operators, NHN, Yandex and Baidu respectively. After its dispute with the Chinese government in the first half of the year, Google lost significant market share to Baidu in 2010, but it finally decided to remain in a search market that is already worth $1.6 billion and growing at an impressive 60 percent in 2010.

IHS Screen Digest expects Google’s total revenues to have reached $28.9 billion in 2010, a rise of 22.5 percent from 2009.