A new report from eMarketer yesterday suggests that over $1.2 billion will be spent on advertising on Facebook. That spending accounts for the vast majority of the $1.68 billion that will be spent on advertising across all social networks. The rapid growth illustrates a number of things however the most obvious is that Facebook is completely dominating social advertising expenditures as well as that 2010 may just be the year that social media advertising becomes more mainstream. eMarketers projections also suggests that at the current rate, social network advertising will not generate the breakthrough revenues that Facebook is in search of.
Given that advertising was hit hard by the recession, it’s actually somewhat impressive that social network ad spends have been so resilient. This was actually somewhat predictable though, which is why Facebook has continued hiring and acquiring companies during the down turn. Also, eMarketer’s existing projections are most likely conservative estimates which means Facebook could theoretically come up with a “breakthrough” advertising model as long as advertisers decide that the ROI is dramatic enough. While advertisers are pouring money into the company, Facebook still has very few “large” advertisers who spend anymore than a couple million a quarter.
While any client who spends $8 million a year is notable, the reality is that Facebook needs to start attracting brands who are willing to invest $100 million a year if they are going to reach Google-scale. To put things in perspective, Google generates almost 6 times Facebook’s annual ad revenue per quarter. In other words, Google generates as much revenue as Facebook does for the entire year, in a mere 2 weeks. While it’s incredible to tout the billion dollar revenue figures, Facebook is involved in a high stakes game in which large investors have poured hundreds of millions of dollars into the company, expecting for Facebook to generate substantial returns in what’s becoming the immediate future.
Mark Zuckerberg, CEO of Facebook, appears to continue to drive the company in the direction of growing its user base over allocating resources toward monetization. Yes, Facebook has launched their Credits service, and there’s no doubt that it will add up to become a very large business. However Facebook needs to focus on new monetization sources and on ways that will be able to fuel the global marketplace. While most entrepreneurs would give just about anything to have a company that’s generating $1.2 billion a year in ad revenue, Facebook’s going to need to be able to produce something much greater that will will make eMarketer’s estimates look outlandish.