Justin Kistner, social director at Facebook preferred marketing developer Webtrends, offered an interesting take on Facebook’s initial public offering and how it can eliminate its potential revenue shortfall.
Kistner’s theory is as follows: If Facebook sells one ad for each of its 500 million daily active users per day, at $0.02 apiece, every day for an entire year, it will generate $3.6 billion in revenue. For some perspective, Facebook’s total revenue for 2011 ($3.711 billion) was $3.711 billion.
Adding any sort of ads to Facebook has proven unpopular, but it’s an interesting theory, in any event. Kistner wrote:
In-site advertising is the money-making engine for Facebook, and it hasn’t even been unleashed. Facebook is just starting to put ads into the newsfeed. If it puts one ad per person, per day, and sells that inventory to 500 million daily active users at $0.02 per person ($20 CPM), Facebook could rack up $3.6 billion in extra revenue. If Facebook releases one ad per person, per session — which is still very noninvasive — it could add a couple more billion dollars of revenue. The potential revenue available in just newsfeed ads is literally tens of billions of dollars.
Readers: Do you think this is something Facebook should look into, or should the social network stick with its strategy of being cautious when adding advertising?