Digital Advertising Industry Snapshot 4Q'25
Programming Note: I will be in San Francisco Bay Area next Tuesday. If any of you wants to meet for lunch around Larkspur, please feel free to reach out. Since it will be one-on-one lunch meeting, I may have to decline if there are multiple interests.
As I do after every quarter, let me share the snapshot of the overall digital advertising industry. Please note that digital advertising industry is defined as Alphabet’s advertising revenue+ Meta’s advertising revenue+ Snap revenue+ Pinterest revenue+ Microsoft Search advertising revenue+ Amazon advertising revenue+ Trade Desk revenue+ AppLovin revenue.
Obviously, the actual digital advertising industry is larger than this, but this snapshot helps me gauge the broader digital advertising industry’s big picture. TikTok and Walmart advertising are notably missing here. Well, TikTok is a private company and Walmart doesn’t disclose their advertising revenue consistently even though it reached $6.4 Billion revenue in 2025 which means Walmart now actually has a larger ad business than everyone in this snapshot except the big tech i.e. Alphabet, Meta, Amazon, and Microsoft.
Some key takeaways from 4Q’25:
Meta continues to gain share. Meta’s share in digital advertising troughed at 28.2% in 3Q’22 and has since then kept gaining ground to reach market share at 34% in 4Q’25. Given their incremental share has almost consistently been 40%+ in the last three years, Meta seems destined to keep growing its share in digital advertising industry. Looking at their guide in 1Q’26, we can be pretty confident that their incremental share in digital advertising will remain comfortably above 40% next quarter as well.
Alphabet, on the other hand, keeps losing share. Notice how Alphabet has been losing share in each of the last four years.
Alphabet’s market share in digital advertising:
4Q’22: 54.6%
4Q’23: 52.2%
4Q’24: 50.1%
4Q’25: 48.1%
However, there are some important nuances which make it not as bad as it may appear for Alphabet at first glance. While Alphabet lost ~650 bps of market share in the last four years, almost half of the share loss was due to Google Network business which is their lowest margin business in advertising whose revenue is also consistently declining every quarter. As search is evolving from browsing the internet to seek answer to mostly just “answer machine”, network revenue may continue to decline.
As you will notice, even YouTube ads lost share in the last four years. But since YouTube’s subscription business continues to gain momentum, YouTube’s ad business is not a reliable indicator of the health of YouTube. Not only more and more formerly ad-supported users graduate to become YouTube subscribers every year, most of these subscribers are also likely to have higher purchasing power which creates a double whammy for the YouTube’s ad revenue. As these valuable impressions become unreachable through ads, I actually wonder if this itself can create some upward pressure on Meta’s CPM as Meta remains one of the handful ways for advertisers to reach scaled advertising userbase.
Nonetheless, Google Search also did lose share. There are a couple of things at play here. When Apple implemented ATT, Google search was largely unaffected due to such policy which enhanced their market share in digital ads industry. Once Meta regained some of the lost signal, Search ended up relinquishing such share gains. Besides, AI is highly likely to be a much larger boon for discovery based advertising such as Meta than it is for high-intent search advertising.
One interesting competitive dynamic that I am curious to observe in the next couple of years is between Google Search and Amazon advertising. Both have high intent search ad business; given Google’s entire AI ecosystem of products and tightly integrated SOTA model capabilities, I wonder if it can give Google a slight tailwind for regaining some query share from Amazon.
Finally, even though the overall advertising industry grew by 18.4% in the last two quarters, much of the fruits of this high growth went to the larger scaled players. With the exception of AppLovin (a company I haven’t closely studied), all the subscale players are growing at a noticeably slower pace compared to the advertising behemoths such as Meta despite having order of magnitude larger base than these sub-scaled players. In the age of AI, the digital advertising infrastructure can become even more complex and the scaled players are moving at such a frantic pace that the sub-scaled players may have harder time staying relevant both for users and advertisers in the next 5-10 years.
I made a slight change yesterday in my portfolio which I will discuss behind the paywall
In addition to “Daily Dose” (yes, DAILY) like this, MBI Deep Dives publishes one Deep Dive on a publicly listed company every month. You can find all the 66 Deep Dives here.
Current Portfolio: