Nov 6, 2015 ยท 4 minutes

After two decades of dithering, big advertisers are finally moving to the Internet en masse. RBC Capital projects that online ads as a percent of ad spending will rise from 25 percent in 2013 to 35 percent in 2017.

And yet, if you are at an ad-dependent businesses like Yelp, AOL or Yahoo, you might find yourself wondering why it's so hard to keep growing when the online-ad market you're working in is growing so much more quickly. The two biggest reasons are: Facebook and Google. And increasingly Facebook.

The two ad giants are not only cleaning up in the Internet advertising market, they are doing so at the expense of smaller companies. Between Google's search ads and ads on YouTube, Alphabet will see about $68 billion in ad revenue this year. Facebook will see $17 billion. However, Facebook is growing faster: at an estimated clip of 42 percent this year against Google/YouTube's 32 percent.

Even between these two giants, things aren't entirely equal. Facebook and Google are not only emerging as the kings of online ads, they are rival kings, not just competing with each other for growth but often doing so at each other's expense. No longer can this market be said to be a zero-sum game.

Analysts assessing the outlook of tech companies like to talk about growth levers, which is a fancy word for – what's your follow-up act? Google and Facebook have different answers to that question. For Google, the answer was made clear in the restructuring into Alphabet. The next acts are years in the making, because the sheer ambition of the projects require time: self-driving cars, affordable fiber for all, expanding the human lifespan, and so on.

Facebook's approach is different. Its follow-up acts are being layered one on top of the other: Instagram adds a revenue stream first, then Messenger and WhatsApp, then Oculus. They're all projects orbiting around Facebook's core idea of being a communication platform that an entire planet uses to talk to each other. Alphabet's projects are more loosely tethered around the vaguer idea of information and its uses – and it appears to have many more projects in the works.

So it wouldn't be surprising if both companies are around for a long time. But it shouldn't also be surprising to see Facebook keep growing faster in the near-term, even at Google's expense. That promise was underscored this week when the company delivered its third-quarter earnings report.

Even for those expecting positive news from Facebook, the report was surprisingly strong. Revenue grew faster last quarter than it did in the previous two quarters. The number of active users accelerated as well, even though daily users have now topped 1 billion (thanks in part to Messenger, which is now folded into user metrics.)

Facebook is tapping into newer sources of revenue. The current quarter will be the first one when Instagram will be fully monetized. Auto-loading videos, including video ads, helped to double the number of videos viewed through Facebook to 8 billion a day from 4 billion a day six months ago. New features and new revenue streams are being built in ways that seem to be deepening user engagement, rather than pushing them away.

(Two cautionary notes on growth from the earnings call. Sheryl Sandberg noted that while some advertisers are adding new ad budgets for Instagram, "some clients are shifting some of their Facebook budget.” Also, most revenue growth is coming from the US and Europe. Revenue per user rose 9 percent to $1.39 in Asia and in the "rest of world" segment was flat at 94 cents. )

Increasingly, some of Facebook's new features look tailor-made to steal market share from Google. Facebook's moves into video this year have been creating a direct competitor to YouTube. Its dynamic product ads appear aimed at luring ad dollars that might have gone to Google's search engine, just as its Search FYI is another tweak to get users to search inside Facebook. The “M” virtual assistant too is another effort to obviate the once ubiquitous Google's search box.

Google is hardly reeling from these punches. The company's own stock price has rallied for the past two quarters as it's offered more evidence that its own mobile revenue growth is healthy. In fact, Google is outperforming Facebook so far this year, up 43 percent against Facebook's 39 percent gain. Both, though, are trouncing the Nasdaq's 8 percent rise.

A few weeks ago, Goldman Sachs issued a note arguing that, if anything, the duopoly of Google and Facebook in online ads will grow stronger as more ad dollars continues to flow in from older media. Goldman foresaw “massive consolidation” in which companies best positioned to serve mobile ads and determining the user experience will thrive. That means Google and Facebook, and maybe Apple.

Facebook is looking like a well-oiled vehicle that will be speeding past everyone in coming years, perhaps even Google. That may be okay with Google as it puts its focus on other Alphabet companies, because Alphabet is more like a DeLorean customized to surge into a more distant future. Some company being founded today may sideline both of these companies by the time that future arrives. For right now, they are the tech companies to beat.