How Ad Tech Fuels Innovation Digital advertising is a moneymaker that allows smart companies to innovate and develop a diverse business.
By Ophir Tanz Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Advertising technology often gets a bad rap, as if its existence is a nothing more than a necessary evil that keeps the internet alive. But in a subtle way, it's also the primary conduit for groundbreaking technology. At companies such as Google and Facebook, ad tech serves as the lucrative core of really nuanced, forward-thinking businesses.
Unfortunately, this side of ad tech's impact often gets overlooked. Instead, critics tend to spend most of their time focusing on the nuisance of digital marketing cluttering up news feeds and desktop and mobile screens. But companies that make their money in this fashion -- whether or not they started out that way -- become empowered to do so much more.
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When people look at Google, they probably think of it as a search engine, which indeed is how it started, pure and simple. But Google became such a powerful and well-known company ultimately because of ad tech, even if it doesn't primarily identify itself that way. By starting AdWords around the turn-of-the-millennium, it monetized its powerful search engine, charging brands in exchange for providing relevant ads on search engine results pages. In 2015, the company earned $75 billion, most of which -- $67.39 billion -- came from ad dollars. And over the years, Google has reinvested that revenue into new technology that goes well beyond best-in-class search. Its business has continually evolved.
In this respect, Google is probably the most prominent example of how advertising can fund innovation. Buoyed by paid search revenue, the tech giant has developed a suite of products such as Gmail, Google Docs and Android, among others, that help both its B2B customers and the public at large. Over the past decade, Google has even pioneered the development of self-driving cars, testing out the vehicles across the U.S. The project has significant potential to impact road safety issues, minimizing risks like speeding, texting behind the wheel, and drunk driving.
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Google's ad dollars have also gone toward funding so-called "moonshots" that have even less to do with its core business, including balloon-powered Internet for people who live far away from digital connectivity, disease-prevention research, and robots. There's even Calico, a Google-owned company that works to increase the human lifespan.
While we may take some of these innovations for granted -- Gmail has been around for 12 years -- that shouldn't minimize their influence and importance. Whether through paid search ads or autonomous vehicles, these projects share a common theme: Google's commitment to making our lives more efficient.
More recently, Facebook has emerged as the next-gen version of Google. After all, people mostly just think of it as a social network. However, Facebook makes almost all of its money from sponsored posts and sophisticated ad-targeting capabilities -- in 2015, $17.08 billion of Facebook's $17.93 billion in total revenue came from advertising. Over the past couple of years, perception of Facebook has started to evolve from a social network to a technology powerhouse. It's finally getting recognition for the way it's influencing the tech world at large.
Since Facebook figured out how to monetize, it's explored everything from live video streaming and chat apps to virtual reality and artificial intelligence. Thanks to ad revenue, Facebook was able to invest in Oculus Rift and put its weight behind giving consumers access to VR gear that could integrate with social media. Like Google, Facebook is well on its way to using its advertising technology as a catalyst to build a much more diverse business.
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Digital advertising may sometimes be intrusive and annoying, and if it gets abusive, it should be called out. But it's also a moneymaker, a spigot that allows smart companies to innovate, whether they're developing a more enjoyable ad experience for consumers or finally getting that flying car off the ground.
