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The world’s largest social networking site look set to take on Google at their own game. Google’s business model of targeted keyword Pay Per Click advertising helped them accrue $23 billion in total advertising revenue back in 2009, and now Facebook are vying for a larger slice of the online advertising pie.
Facebook are using a very similar business model to Google with a focus on small to medium sized companies using their self-serve ad system. In a recent AdAge article, they reported on new estimates from eMarketer which show Facebook taking $1.86 billion in worldwide advertising revenue. What AdAge reveal is how 60% of this revenue was accrued from small to medium companies who use self-serve tools rather than utilising agencies.
$1.21 billion of the $1.86 billion worldwide advertising revenue came from the U.S, giving Facebook a 4.7% share of the total US online advertising spend. eMarketer reveal how this trend is set to continue with year on year growth, suggesting that by 2012 Facebook could have a total share of 8.8% in the US online advertising spend. With the majority of this revenue coming from small to medium businesses, could this see Google giving up a percentage of its advertising share?
Well, what these figures don’t tell you is that Myspace are predicted to lose a serious amount of ground in terms of advertising revenue, declining from $470 million in 2009 to $156 million in 2012. Therefore, whilst Facebook are starting to compete more with Google, it is unlikely to have the impact that the predicted figures might first suggest. The emergence of an advertising duopoly between Facebook and Google may be evident in the future as Facebook set to utilise Google’s business model, but there are still voices of disagreement with Facebook’s advertising platform.
It can’t be overlooked that whilst Facebook’s advertising platform targets large audiences, it is not as specific as Google’s keyword advertising. This will not affect large companies that buy advertising in bulk, because large audiences will recognise these brands. However the small to medium companies that Facebook are trying to target, at the expense of Google, may not reap the rewards of this advertising platform as they would with Google. Facebook are therefore heading in the right direction but unfortunately they have a long way to go yet.