Google has a new competitor in online advertising – and it’s today’s most famous Internet startup.
According to market research firm eMarketer, social networking website Facebook earned revenues of $1.86 billion last year – from advertising alone. Whoa. The figure surpassed the estimate of many industry observers, who had asserted that Facebook was on track to reach $2 billion in revenues in 2010 – a total that Facebook has likely met and exceeded, considering that online advertising is only one of its several revenue streams.
“2010 was the year that Facebook firmly established itself as a major force not only in social network advertising but all of online advertising,” said eMarketer analyst Debra Aho Williamson, who is also the author of the upcoming report, “Worldwide Social Network Ad Spending: 2011 Outlook”.
Williamson added that 60 percent of Facebook’s ad revenue came from small businesses.
Facebook’s total online ad earnings, which came mostly from the 50 billion display ads placed on the site every month (or close to 1 trillion in one year), accounts for 5 percent of all online advertising dollars spent in 2010. However, according to TechCrunch’s Erick Schonfeld, Facebook is responsible for a quarter of all display ads in the US. “The gap between its share of display ad impressions and ad dollars shows how poorly Facebook is monetizing those ads,” he says, “and (this) suggests there is still a lot of room for improvement.”
Apart from its self-serve display ads platform, Facebook is experimenting with several other revenue streams, including Facebook Deals (a location-based platform) and a virtual currency (for buying premium items, gift cards, and goods for apps and games) called Facebook Credits.