Facebook is About to Surpass Google and Yahoo in this Core Business
Some interesting data via FT.com on the phenomenon that is Facebook. The company looks to be on the path to be the leader in display ads (by revenue) by the end of this year. (Check Out “Is Facebook Becoming Google on Steroids?“)
- Facebook’s large user base will make it the world’s largest online display advertising company by revenue this year, overtaking the comparable businesses of Google (NASDAQ:GOOG) and Yahoo (NASDAQ:YHOO), according to analysis published on Tuesday.
- Enders Analysis, based in London, in a report on Tuesday, forecasts that Facebook will lift its advertising revenues from $1.8bn to $3.5bn in 2011, a rise of 95 percent. At the same time, Google’s display business – which includes YouTube, the video site, and DoubleClick, its banner network – is expected to rise from $2bn last year to $2.6bn this year, with Facebook extending its lead in 2012.
- Display advertising includes images and video shown on a standard web page, although it excludes search, from which Google (NASDAQ:GOOG) derives significantly larger revenues.
- In spite of Facebook’s attempts to liken the reach and influence of its site to television, its yield per ad impression remains low, making its advertising relatively cheap. Click-through rates are broadly similar to standard online ad formats, such as banners, which Facebook abandoned on its site in favour of text-heavy ads, often mentioning which of a user’s friends also like the advertised product or service
- “Despite Facebook’s growth, revenue per user remains low compared to other internet businesses, with Google generating eight times the revenue per user,” Mr Maude said. Although many of Facebook’s clients are “relatively low quality”, such as group-buying websites, rather than big brands, Mr Maude said its advertisers were shifting money from other media properties.
- Its growth therefore stems from the volume of ads shown and the time spent on its site. In the US, Facebook accounted for three time as many ad impressions as Yahoo (NASDAQ:YHOO), its nearest competitor, according to Comscore (NASDAQ:SCOR), the traffic monitoring group.
- Facebook is also starting to challenge Google as a referrer of traffic to other websites, although it is still some way behind the search engine. Figures from Comscore show that traffic to the top online retail site from Google is falling in countries such as the US, UK and France, while Facebook is becoming more significant, although it is yet to overtake Google (NASDAQ:GOOG).
- “Social media … and Facebook in particular, are emerging as a powerful news referring source,” Pew said in its report. “At five of the top sites, Facebook is the second or third most important driver of traffic. Twitter, on the other hand, barely registers as a referring source.”
Trader Mark is the founder of Fund My Mutual Fund.
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