Friday, August 13, 2010

Local Ad Dollars Flowing To Facebook

EW YORK ( -- With its more than half billion users and privately-held status, Facebook's revenue has long been a favorite guessing game for observers from Silicon Valley to Wall Street. But a new estimate from eMarketer says the company will book $1.285 billion in global advertising alone this year, almost double the estimated $665 million the company took in last year. That figure doesn't include Facebook's so-called virtual currency trade, which would nonetheless account for a fraction of the company's overall business.


Interestingly, Facebook's fastest growing area comes from its self-serve ad platform, which launched in August 2007. "We believe it accounted for about half of all ad spending on Facebook," eMarketer senior analyst Debra Aho Williamson said. "It's really become a tremendous business for the company. We didn't account for the size of that business last year in our estimate, but we found that it's become a great tool for direct-marketing advertisers."

The eMarketer analysis stands as a significant third-party verification against some of the provisional numbers floating around in the media. A July Bloomberg article, for example, cited two anonymous sources indicating Facebook would book $1.4 billion this year. A March report from the Wall Street Journal pegged the company's 2010 revenue at a wide range of $1.2 billion to $2 billion, also citing anonymous sources. In both articles, it was unclear whether the information came from inside or outside the company itself.

Like Google, Facebook's self-serve advertisers are largely local, coming from marketing dollars once spent on yellow pages listings. If those advertisers perform anything like Google's, they won't be as cyclical as national brand advertising, giving Facebook a buffer against future ad slumps.

Two things strike me here: First, is there really $500 million local ad dollars going to Facebook? If those estimates are true, it's a little staggering. Let's do a little math here. Divide $500m by 200 TV DMA's across the country. That's over $2m in local ad dollars flowing to a new competitor. Obviously Facebook's local ad dollars are not evenly divided across all DMA's, but whatever the size of market you compete in, consider what just happened in the last year.

The second thing that strikes me about the Ad Age story is that Facebook's local ad dollars are SELF-SERVED. I don't underestimate local advertiser's ability to wrap their arms around new technology. I just find most don't have the time. This number suggests they're making the time.

Posted via email from Randy's Stuff

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