Facebook Australia advertising revenue likely to grow by 7 per cent: Morgan Stanley

Facebook’s ad revenue in Australia was at an estimated $700m for 2019, and likely to grow to $1.6bn in 2024.

Treasurer Josh Frydenberg has instructed the ACCC to draw up a compulsory code of conduct to regulate payments between Google and Facebook and media for use of content, a move that has been opposed by Google and Facebook. Picture: AFP

Facebook’s ad revenue in Australia is estimated at $700m for 2019 and likely to grow to $1.6bn in 2024, according to calculations by Morgan Stanley.

In a research note, Morgan Stanley analysts estimated big US tech players including Google and Facebook grew their collective ad share in Australia to $6.2bn in 2019 alone.

“Digital/internet and mobile advertising in Australia is dominated by US-based tech companies such as Facebook/Instagram, Google/YouTube, Snap, Twitter, et al. Based on ASIC filings and our discussions with industry contacts, our estimate is that global tech players collected an aggregate of $6.2bn worth of ad spend in Australia in 2019,” Morgan Stanley wrote.

The report estimated that Facebook’s current ad revenue is around $700m in Australia, and was likely to grow – despite the effects of COVID-19 – by 7 per cent in 2020.

“Facebook Australia – Based on local ASIC filings in Australia for history, and then assuming forward-looking growth rates consistent with Morgan Stanley’s estimates for its parent FB, we estimate Facebook Australia’s gross revenue was $700m in 2019.

“We forecast a lower, but still positive 7 per cent growth rate in 2020, consistent with the wider ad industry slowdown, before rising at a compound annual growth rate of 16 per cent over the four years to the $1.2bn to 1.6bn range in revenues in 2024.”

However, it is not clear whether the estimated revenue includes all Facebook advertising revenue from Australia including offshore selling or just that accounted for by Australian operations. 

Google recently reported advertising revenue of $4.3bn from the Australian market alone, up from $3.7bn a year ago, when its entire revenues from Australian operations were included, including offshore business that worked in the Australian market. 

Last month, Treasurer Josh Frydenberg instructed the ACCC to draw up a compulsory code of conduct to regulate payments between Google and Facebook and media for use of content, a move that has been opposed by Google and Facebook.

Only this week ACCC boss Rod Sims said there was “clearly value” in news for Facebook and Google.

The Morgan Stanley research note referred to the estimated $6.2bn spent of ad spend on tech as “global leakage” to the tech giants, estimating 66 per cent of digital ad spend went to the tech giants.

“We refer to this $6.2bn as ‘global leakage’ of ad spend. For perspective, the $6.2bn we estimate US ad tech players collected in ad spend from Australia 2019 represents about 66 per cent of digital ad spend ($9.2bn) and about 37 per cent of total ad spend in Australia ($16.6bn). Importantly, these global gains continue to grow at a fast rate.”

According to Morgan Stanley, the current trends show sign of abating.

“There has been a line of thought recently that the ad dollars spent with Google and Facebook in Australia have started to plateau, with dollars returning to domestic traditional media.

“We disagree …. While the overall Australia ad market has shown little to no growth at all the last few years individual filings of the global media/tech players shows they have increased their revenues in this market at a CAGR of about 20 per cent for the past three years (2016-19), and we forecast about 16 per cent for the next five years (2019-24).

“There is no plateau; if anything, we expect an acceleration post COVID-19.”