Google's Advertisers Are Dominated by Wall Street; Can Facebook Say the Same?

Google (GOOG) is heavily dependent on the financial sector for its revenue, according to a new study of paid search terms, which raises the interesting question of what type of advertiser Facebook gets most of its money from.

Until Facebook files for an IPO, we won't know much about how its revenue is structured. Both Google and Facebook play in the same-size ballparks -- they're both massive and have an almost infinite pool of advertisers to draw from. Almost infinite, but not quite. As Google's Q2 2011 earnings showed, there is not an infinite number of people willing to click on ads and thus drive revenue for the search giant. Total aggregate paid clicks declined sequentially at Google in Q2, an unusual event, but Google's revenue still increased because the average price it got for paid clicks rose 12 percent.

Nearly half the top 20 most-expensive and most-used Adwords keywords on Google are rooted in Wall Street: "Insurance" sells for $54.91 per click, "Loans" for $44.28 and "Mortgage" for $47.12, according to a study by Wordstream, which looked at 10,000 keywords over a 90-day period. Those three words alone account for 46 percent of Google's revenue from its top 20 most expensive words. (Wordstream's infographic -- click to enlarge -- misleadingly represents that 46 percent as a majority of Google's revenues.) The rest of the top 20 is littered with terms like "credit," "lawyer," and "claim."

Things or people?
There's a common notion among advertisers that Google is best for advertising "things" and Facebook is best for targeting "people" (as Google's mortgage advertisers bear out). There's an amusing discussion of how this works out for smaller clients on this blog for divorce lawyers. You'd think Facebook would be good for targeting married people who want to split, like 45-year-old married men, but it's not. Facebook does not provide advertisers with the ability to target people who change their statuses from "married" to "single," apparently:

With Facebook, you've got to decide whether you want to take that semi-shotgun approach to reaching a target demographic and just hit each person in that segment regardless of how interested he or she may be in the service you're offering. It's a lot like advertising in the sports section of the paper when you want to reach older, generally married men. It is, however, a bit more targeted than you can get with other media.

The good news about Facebook, so far, is that advertising there is less expensive than on Google, generally. You can run your ad and make lots of impressions without spending nearly what you might spend in the same period on Google.

Nonetheless, there's a lot of them. Research firm Efficient Frontier estimates Facebook increased its cost-per-click 22 percent in Q2, following a 40 percent increase in Q1 2011.

Again, lack of visibility on Facebook's finances frustrates anyone trying to figure out how big it is. But if Facebook is dependent on hyper-local advertising then one might look at Groupon (GRPN), another large hyper-local ad seller, as a comparison. Groupon sold $713 million in local ads last year. Facebook is bigger than Groupon, of course, but is it 10 times bigger? Some estimates say Facebook makes nearly $7 billion in annual revenues. If that were true, then Facebook would already be by far the dominant player in local ads and daily deals. Alternatively, it could just be that people like clicking on pictures of cats.

Related:

• Google Hits a Revenue Ceiling as Paid Clicks Fall
• Social Media Is a Tool of the CIA. Seriously
• Conspiracy in Plain View: Facebook's Secret, Closed-Door Club for Advertisers
• How Facebook Intends to Supplant Google as the Web's No.1 Utility