Google's concentration of ad revenue

Google's most recent Q3 earnings call shows that advertising is no longer a sustainable business model on the internet.

Google drove 75% of ad impressions in the US in the 3rd quarter of 2018, based on a recently unredacted lawsuit (link). Its dominance over the online advertising kingdom is unrivaled. It’s not the first time I call Google the most successful startup ever.

Google’s most recent earnings in Q3 2021 underline this power even more. Revenue climbed to a stunning $65.1B, up +5.1% from Q2 and +40.9% from Q3 2020. As always, the majority of revenue (58.2%) comes from Search ads.

Source: Google earnings

Context is important in this situation. The aforementioned lawsuit unveiled shady practices when it comes to Google’s advertising market. E-commerce saw its biggest boom amid the Covid 19 Pandemic, yet. And Apple’s recent privacy changes had a strong impact on the overall advertising market.

While Google sees strong tailwinds from the e-commerce boom that started with the pandemic, the ad industry faces headwinds. Apple’s recent privacy changes caused problems for other ad players like Facebook and Snap. Facebook brought in $29.01B instead of $29.57 and adjusted Q4 projections down to $31.5 instead of the $34.8B analysts expected. Snap’s shared dropped -22% after announcing missed revenue targets.

Apple sits at a bottleneck because it controls a massive chunk of the hardware market (iPhone, iPad, Macs). With fewer conversion data, which is important for direct-response ads, attribution gets harder. As a result, ad targeting gets fuzzier and advertisers have to spend more money to get the same results.

Not so for Google, though. Search ads don’t suffer from targeting issues because they’re based on intent instead of behavior. The search engine doesn’t need to profile users because the keywords they search for signal intent. On top of that, the search giant owns Android and Chrome, two important data sources for behavior. That’s why, in part, Google advocates for FLoC and killing the cookie. It simply doesn’t need it.

There is another company that has access to tons of search and intent data: Amazon! The e-commerce giant saw ad sales growth of +87.5% YoY in H1 2021 [link]. 53% of searches for consumer goods now begin on Amazon, and that’s a huge problem for Google.


Google fights a relentless fight against Amazon, which controls commerce-driven searches. Google’s counter is redesigned search pages that look like the shopping tab for transactional queries and pushing commercial searches deep into pay2play territory. This strategy comes at the cost of publishers that used to drive sales through ads.

Online advertising is no longer a sustainable business model

Not too long ago, before 2008’s ad-ageddon, publishers made a lot of money with ads. Google, Facebook & co didn’t just provide better ad-targeting and monitoring, which unbundled ads from publishers. Google also started punishing sites for too many (disruptive) ads, and Facebook decided to decrease organic reach and instead charge anyone who wants to drive traffic from the platform to their sites. This tore the business model for publishers apart.

Today, most successful publishers don’t display ads but make money with either subscriptions or affiliate links. A good example is Dotdash, which became the 10th largest publisher on the internet after acquiring Meredith (link). Together, they drove $1B in digital revenues over the last 12 months.


Dotdash is an affiliate publisher similar to Red Ventures, which owns sites like Investopedia. The business model is based on creating content that drives traffic through SEO and paid channels to convert it to revenue through affiliate links instead of ads. They focus on high-intent keywords like “car delivery insurance” or “robot advisor”.

Another example is Nerdwallet, one of the most successful affiliates in the world, which recently went public at a $5B valuation. Nerdwallet gets 73% of traffic from organic:

In the trailing twelve months as of June 30, 2021, approximately 73% of all traffic to NerdWallet came organically through direct or unpaid channels, reflecting the strength of our brand and organic marketing efforts. Our in-house, award-winning and experienced editorial team leverages search-engine optimization best practices and technology, and designs interfaces to help consumers easily find the information they are seeking. Our editorial team also optimizes page structure to increase visibility, not only for organic search results, but also for Google’s premium features such as FAQs, featured snippets, and video results.

In its S-1, Nerdwallet calls out competition from traditional media, social influencers, … and Google!

We are dependent on internet search engines, in particular, Google, to direct traffic to our websites and refer new users to our platform. If search engines’ algorithms, methodologies, and/or policies are modified or enforced in ways we do not anticipate, or if our search results page rankings decline for other reasons, traffic to our platform or user growth or engagement could decline, any of which would harm our business, financial condition and results of operations.

This tension between dependency and competition has been symbolic for affiliate businesses in the last two decades. As a result, advertising on the internet isn’t worth it anymore if your site depends on traffic from Google. Ads inherently come at the cost of user experience over time, and Google is much more efficient ad displaying relevant ads to searchers without them having to click through to a site.

Already before the internet, tv networks and radio stations ran more and more commercial content over time. In 2019, commercials per hour hit all-time highs with up to 14.3 minutes (link). The same fate awaits online publishers that don’t get the pivot to subscriptions or affiliate right.