Google, Advertising Lead $86B Of Online Media Sales In H1

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Strategy Analytics has today published a rundown of how online media revenues performed in the first half of 2014 — looking specifically at how 44 of the biggest publicly-listed companies fared the first half of this year. Altogether, this group pulled in $85.9 billion in digital media revenues in the first half of 2014, a rise of 17% on the same period a year ago. And, perhaps unsurprisingly, search engine giant Google continues to be the very biggest player online, collecting $31.4 million in sales in the period on the strength of its ad business.

To give you some context for what Google’s number means, it is more than one-third of the total value of all the online revenue generated by all 44 businesses, and nearly as much as the rest of the top-ten list totalled up. E-commerce giant Amazon came in at number-two with $10.3 billion.

Other top-line conclusions: China’s online businesses are still far smaller but they are growing fast, taking up 4 of the top-10 fastest growing company slots. Yahoo is still ranking among the top 10 for overall revenues, with $2.2 billion in sales, but it is also the only one in that group that declined (down 3%).

And although games and other digital content is growing, advertising is still the biggest revenue generator by a large margin.

Google’s growth at the moment, Strategy Analytics says, was at 12% over last year, putting it ahead of Amazon’s 9% growth but very far behind others that lag behind it in real numbers. Facebook’s $5.4 billion in online revenues for H1 was a whopping 66% up on a year ago.

That put FB at a faster pace of growth at the moment than some of the bigger Chinese sites: Tencent pulled in $5.4 billion (up 43%), while China’s Google equivalent Baidu posted $3.4 billion, up 56%. Sina was up 36%.

As you would expect with more up-and-coming services, there were smaller players that grew even faster, though.

Chinese internet security software firm Qihoo, it says, was the biggest growth story, with its $582 million in online revenues a rise of 123%. Twitter’s $562 million was up 122%.

“A red-hot Chinese Internet market is challenging the historical dominance of US companies,” writes Michael Goodman, Director, Digital Media for Strategy Analytics. “The fact that there are about 2.5x more Chinese than Americans online is a big factor so they’ve been able to hit such heights solely in a domestic market. The big question, and the key threat to US global dominance, is whether they can translate this success outside China.”

SA doesn’t give a growth rate for Apple’s iTunes but points out that its first half sales were $5.2 billion. Apple, of course, is the world’s biggest tech company today in terms of market cap, and most of its revenues come from hardware sales, not online content. Also, notably Alibaba is not in the mix, presumably because there are no public numbers to use for comparison.

SA online media revs

In terms of what is selling well online, although we have seen an explosion of digital content services, ads are still the big money maker. Online ads accounted for 77% of all digital media revenues, followed by online games (15%) and video (5%).

“Music and content delivery networks (the latter such as Akamai and Limelight who serve content on behalf of publishers) split the remaining 3%,” it notes. Games are the fastest riser, up 26%, but ads and video are not too far behind at 24%. Content delivery networks grew revenues by 21% while music didn’t do very well at all, up by only 9% (not a great sign for the Spotify’s and Soundcloud’s of the world).

SA online media biz by type

What will be worth watching is how well ad companies — and really all online companies — diversify in the future.

SA notes that 100% of Baidu’s and Microsoft’s Online Services revenue came from advertising, while Facebook attributed 91% to ads. Google makes 90% of its online revenues from ads, while Yahoo makes 80% (60% for Yahoo Japan, which also has a broadband service).

“Music streamer Pandora also relies heavily on advertising accounting for over three-quarters (77%) of revenues,” it notes — perhaps one reason why Pandora creeped into that top-ten list despite music’s otherwise lacklustre performance.

SA notes that China’s firms are more diversified than those in the west.

“The Chinese companies have been particularly adept at generating revenues across a variety of services,” Goodman writes. “The fastest mover, Qihoo, for example has done well in both advertising and Internet value-added services, driven by expansion into search and mobile.” This is not always the case, however — witness Baidu’s 100% ad-based revenue model.

Diversification potentially also underscores why companies like Amazon are moving so aggressively into a range of services, from content to advertising to delivery to hosting to private label goods, to complement its e-commerce operations.