Facebook Books $1.86B in Advertising; Muscles In on Google Turf

NEW YORK (AdAge.com) -- It turns out Facebook is a lot like Google after all. As the social network steams past 650 million global users, its business is looking more like Google's in that the majority of its ad sales now come from small- and medium-size companies that make use of its self-serve ad system, a model that turned Google into a $200 billion behemoth during the past decade. According to an estimate from eMarketer, Facebook took in $1.86 billion in worldwide advertising revenue for 2010, a 151% increase over the company's estimated 2009 advertising revenue of $740 million worldwide. Not surprisingly, the majority of that, $1.21 billion, was earned inside the U.S. But what is surprising is the majority of revenue, 60% or $1.12 billion, was earned from smaller companies in 2010, those more likely to be using self-serve tools rather than work through a media agency. That's greater than the $740 million coming from major marketers like Coke, P&G or Match.com. "Those advertisers are really juicing Facebook's growth," said Debra Williamson, principal analyst at eMarketer. "They buy advertising in bulk. They've done it for years on Google, and now they're taking that expertise to Facebook." The estimate adds weight to the leaked revenue figures that came out of the company's recent funding round with Goldman Sachs, which could put as much as $2 billion into Facebook's coffers without an IPO. Reuters reported that based on Goldman's offering plan, the company had made $1.2 billion in the first nine months of the year, suggesting that an annual run-rate of $2 billion is a little high. Source: eMarketer, January 2011 In last year's estimate, Ms. Williamson said Facebook's self-serve business hovered around 50%, but that that share has now increased to three-fifths of its ad dollars, showing that its growth has come in the vein of Google. That doesn't mean that Facebook is taking any significant market share from the search titan; indeed, Google makes more than $2 billion in advertising revenue in a given month. But Ms. Williamson believes there's an emerging duopoly in the self-serve online-ad realm. The social network now accounts for almost 5% of total online-ad spending, and its share may increase to as much as 8% in 2011. The Palo Alto, Calif.-based social network has been less interested in trying to explicitly meet marketers' demands and is more focused on building out products that are better suited to its 650 million registered users. As a result of Facebook's hands-off approach, an economy around third-party services has emerged. Startups such as Buddy Media and Context Optional have built a business helping both agencies and brand executives better manage their presences on Facebook by licensing their software to brand managers to more efficiently manage what sometimes amounts to thousands of Facebook pages. A major brand such as McDonald's may have a Facebook page for every franchise, which can be difficult to manage with just Facebook's native features. Nonetheless, both Google and Facebook still maintain large direct-sales teams that broker ad buys with major marketers, such as Coke or P&G's raft of products. Thus far, Facebook has brought in its fair share of brand dollars, with AT&T and Match.com accounting for the two biggest advertisers on social networks, according to ComScore's third-quarter analysis, which looks at how many ad impressions advertisers bought on Facebook and MySpace, though Facebook accounts for almost all of the ad buys. Interestingly, Google itself was the fifth-biggest advertiser for the same period, as it was looking to market its Chrome web browser. Curiously, the third-biggest advertiser was a completely unknown brand called Make-My-Baby.com that bought 1.75 billion ad impressions in the third quarter. But despite how marketers are flocking to Facebook, Ms. Williamson pointed out that the social network still sits on a trove of valuable information, and said, "Facebook is the biggest storehouse of consumer data on the internet."

Facebook Books $1.86B in Advertising; Muscles In on Google Turf

Featured Stories