Facebook as a New Advertising Giant
Recent figures from the U.S. give us an idea of what Facebook might mean for us.
Social networks such as Facebook, Twitter, LinkedIn, Xing, and others are a major topic in the media industry, even though hardly anyone has yet found the right communication strategy for them—let alone implemented it effectively over the long term. Anyone who is still wondering whether community platforms should primarily be used as new sales channels, for customer retention, for PR, or for brand communication may be overlooking the most obvious solution: traditional advertising.
Nearly one in four online advertising banners in the U.S. now appears on Facebook, according to a Comscore report for the third quarter of 2010. Between July and September, the industry giant served 297 billion display ads, increasing its market share by 13.9 percent compared to the same period last year to 23.1 percent. This makes Facebook bigger in the banner ad business than Yahoo, Microsoft, Fox, and Google combined. However, because click-through rates on Facebook are comparatively low, advertising rates on Facebook are rock-bottom, with a cost per thousand impressions (CPM) of one dollar (industry estimate).
If we quickly extrapolate these figures to Switzerland (based on user numbers), this would amount to approximately 1.7 billion display ad impressions per month. At a CPM rate of one dollar, this corresponds to revenue of about 1.7 million Swiss francs, or 34 million Swiss francs if we use the standard CPM rate of 20 Swiss francs in this country as a basis. The potential that advertising on Facebook still holds here becomes clear when these figures are compared with Mediafocus’s data on the online advertising market in Switzerland. For the first half of 2010, the traditional online advertising (display) segment is reported at 70.9 million Swiss francs, which amounts to 11.67 million Swiss francs per month.
However, American industry observers see CPM rates on Facebook rising, as the platform is becoming increasingly adept at processing and utilizing users’ sociodemographic data for targeted advertising. Such improvements in targeting, along with the emerging economic recovery, are key drivers of the overall online display market, which, according to Comscore, has grown by 22 percent compared to the previous year.
Christoph J. Walther
Nearly one in four online advertising banners in the U.S. now appears on Facebook, according to a Comscore report for the third quarter of 2010. Between July and September, the industry giant served 297 billion display ads, increasing its market share by 13.9 percent compared to the same period last year to 23.1 percent. This makes Facebook bigger in the banner ad business than Yahoo, Microsoft, Fox, and Google combined. However, because click-through rates on Facebook are comparatively low, advertising rates on Facebook are rock-bottom, with a cost per thousand impressions (CPM) of one dollar (industry estimate).
If we quickly extrapolate these figures to Switzerland (based on user numbers), this would amount to approximately 1.7 billion display ad impressions per month. At a CPM rate of one dollar, this corresponds to revenue of about 1.7 million Swiss francs, or 34 million Swiss francs if we use the standard CPM rate of 20 Swiss francs in this country as a basis. The potential that advertising on Facebook still holds here becomes clear when these figures are compared with Mediafocus’s data on the online advertising market in Switzerland. For the first half of 2010, the traditional online advertising (display) segment is reported at 70.9 million Swiss francs, which amounts to 11.67 million Swiss francs per month.
However, American industry observers see CPM rates on Facebook rising, as the platform is becoming increasingly adept at processing and utilizing users’ sociodemographic data for targeted advertising. Such improvements in targeting, along with the emerging economic recovery, are key drivers of the overall online display market, which, according to Comscore, has grown by 22 percent compared to the previous year.
Christoph J. Walther
