Marketers worldwide will spend $4.05 billion on Facebook advertising this year, a new report by eMarketer predicts.
In the United States alone, marketers will shell out $2.19 billion in 2011, the study said. By comparison, companies spent a total of $1.86 billion in 2010: Of that, $1.21 billion was used to reach consumers in the United States, while marketers spent the remaining $65 million to influence the rest of the world, eMarketer's study said. This adds up to an average ad rate of approximately $8.10 per person. By comparison, TV commercials can cost about $100,000 per 30 seconds, although there are many variables, such as market, time, and programming, that can dramatically alter the price.
"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 Debra Aho Williamson, eMarketer principal analyst and author of the upcoming report, "Worldwide Social Network Ad Spending: 2011 Outlook." "In 2011, its global presence is something multinational advertisers can't ignore."
Facebook is expected to represent 7.8% of the U.S. online ad market this year compared with its 4.7% share in 2010, eMarketer said.
"If Facebook can continue to increase its global user base and boost the amount of revenue it generates per user, it could even surpass these forecasts," Williamson said. "Facebook must continue to innovate its user experience and its ad platform."
Businesses will slash ad spending at faltering MySpace, reducing their budgets to $184 million in 2011 from last year's $288 million and $470 million in 2009, the report said.
Other social media sites will see gains, however. After all, total U.S. ad spending on social media sites is expected to grow 55% compared with 2010, to over $3 billion, rising an additional 27.7% in 2012 to reach almost $4 billion, eMarketer said. In the United States, social media ad dollars will represent 10.8% of total online spending; worldwide, it will represent 8.7% of spending, the study said.
In 2010, 60% of Facebook's ad revenue came from smaller companies, according to Advertising Age, which cited eMarketer data. A year earlier, smaller firms generated about half of Facebook's ad sales, the industry publication said.
"Those advertisers are really juicing Facebook's growth," Williamson told Advertising Age. "They buy advertising in bulk. They've done it for years on Google, and now they're taking that expertise to Facebook."
Big-name advertisers such as AT&T, Match.com, Coca-Cola, and Proctor & Gamble helped Facebook generate $740 million in sales last year, Advertising Age said.
Advertising is not privately held Facebook's sole source of revenue. The company's Facebook Credits virtual currency, which it sells to users for playing games and the purchase of virtual gifts, is expected to soon account for about one-third of Facebook's total revenue, said Sean Parker, former Facebook president and Napster co-founder, last summer. His comments, made at an industry conference, contradicted statements made in April by Facebook founder Mark Zuckerberg.
"You may not believe me when I say this," said Zuckerberg in April 2010 at the f8 developer conference, as reported by SocialBeat. "We are doing it for developers. But it's not a revenue opportunity anytime soon. Ads are a very good business." Facebook Credits were, instead, created to help developers easily monetize their games through services or the sale of virtual goods, he said.