Ryan Buddenhagen, July 26, 2012
Amid the controversy of Facebook’s IPO several months ago, there has been considerable debate on not just the viability of advertising on Facebook, but doing so across social media platforms. The potential was always there, but its sustainability for generating revenue over the long-term has yet to be fully proven.
Now, with new research out from Gartner, social media advertising appears to be proving itself one ad-type and platform at a time. The numbers don’t lie. Last year, social media revenue was 11.8 billion, and the research projects that number to be $16.9 this year, an increase of over 40% - and advertising will make up the biggest share of that revenue, projected at $8.8 billion this year. Second to advertising in relation to share of overall revenue was social gaming, which Gartner expects to reach $6.2 billion this year. But on a day that Facebook announces their second quarter earnings, it is all about the ad revenue.
While standard Facebook ads are still finding their way, their mobile ad offerings, which they added in the second quarter are doing exceptionally well. They are doing so well in fact that they are outperforming their counterparts on the standard platform to an almost troubling degree. Sponsored stories are the only mobile ads offered as of yet and they are actions, including posts, from both brands and everyday users/consumers that the brands promote.
Now the “troublingly” successful figures…the CPM for every thousand sponsored story ads is $9.86 which is approximately 13 times that experienced by the standard format ads, this according to TBG Advertising and reported by Internet Retailer. Further, the mobile ads that were in news feeds had double the click-through rates of ads in the news feed on the standard platform – 1.14% compared to .59%.
Takeaway
Companies have found how to generate revenue from mobile, and advertising is the largest piece of the pie. With the biggest industry player, Facebook, increases in various CPM and click-through rates show that the ads are indeed working for many brands, which is a positive sign, but not a dead-set indicator on their long-term advertising viability or market value. The industry changes just too quickly and they need more success under their belt for such assertions.
But what it does tell us is that Facebook is working on the fix that so many were calling for during their IPO, an improved advertising structure. They are off to a positive start in that regard, but they must build and retain their ability to adapt and evolve their advertising offerings as the nature of their user behavior changes. More ecommerce and social networking is expected on mobile in the coming years, so the mobile platform may be where they make their most money at least that is what the early indicators are pointing to.
Lastly, companies that are not advertising via social, and could benefit, should re-evaluate and look to enter the market. Doing so requires selecting the appropriate platform that matches your target audience and desired ad-type.
Also, be sure to check our CEO, Ken Wisnefski, for his interview with Bloomberg TV at 2:10 PM today discussing the latest on Facebook and their earnings outlook.
For more information on social media and how best to enter this market in terms of advertising potential, reach out to me directly at rbuddenhagen(at)webimax.com and @ryanwbudd.
