Advertisers annually spend about $265 billion across 11 different types of media to reach U.S. consumers.
Facebook, has established itself as a social networking site to reckon with and potentially see revenues of $1 Billion by 2015. The audacious goal seems very much possible in light of the following trends:
- Contraction in offline Ad spending as advertisers migrates to less expensive media with better ROI potential. Online advertisement is the best obvious choice.
- The advent of DVR has deprived television advertisers of a valuable stream to reach a large user base.
- Declining Newspaper subscriptions (7%) will force advertisers to reallocate their budgets and find new means to deliver national and local advertisements. Historically newspapers have accounted for a 2.5 x multiple for each AD impression served per household.
- Paid Search Advertisements while very effective for National Brand advertisers has failed to generate the same kind of impact for local and small businesses.
Social Networking sites come closest to replicating the 2.5 x multiple for each AD impression served because a typical user is connected to 100’s of other users, friends and family. Facebook definitely has the potential to address all or some of the above challenges and offers advertisers a unique value proposition.
Revenue projections assuming a modest 5% market share for Facebook, of the overall graphical advertising market, put revenues from advertising alone to about $800 Million by 2015.
|
Local Online Advertisements |
2010 |
2011 |
2012 |
2013 |
2014 |
|
Annual Local Online Ad Impressions Served (Billions)2 |
296 |
342 |
342 |
342 |
342 |
|
Facebook: Share of Local Online Ad Impressions |
2.00% |
2.64% |
3.48% |
4.60% |
5.52% |
|
Facebook Local AD Impression Multiple |
3 |
3 |
3 |
3 |
3 |
|
Cost per thousand impressions (CPM) |
$7.50 |
$7.43 |
$7.35 |
$7.28 |
$7 click here now.20 |
|
Annual Local AD Revenues |
$133,105,500 |
$200,903,319 |
$262,540,457 |
$343,087,869 |
$407,588,389 |
|
National Online Annual Advertisements |
2010 |
2011 |
2012 |
2013 |
2014 |
|
National Online Ad Impressions Served (Billions)1 |
2,689 |
2,823 |
2,823 |
2,823 |
2,823 |
|
Facebook: Share of Online Ad Impressions |
2.00% |
2.60% |
3.12% |
3.74% |
4.49% |
|
Facebook AD Impression Multiple |
2 |
2 |
2 |
2 |
2 |
|
Cost per thousand impressions (CPM) |
$1.15 |
$1.13 |
$1.12 |
$1.10 |
$1.08 |
|
Annual National AD Revenues |
$123,694,000 |
$166,309,675 |
$196,578,036 |
$232,355,239 |
$274,643,892 |
|
Total Annual AD Revenues |
$256,799,500 |
$367,212,994 |
$459,118,493 |
$575,443,108 |
$682,232,281 |
References:
- J.P Morgan Global Equity Research, Jan 2009
- Economics of Search Marketing, Borrell Associates, June 2009
- IAB Internet Advertising Revenue Report, 2008