The Rise of Facebook Advertising

When you think of online advertising, Facebook may not be top of mind but a new report from eMarketer estimates Facebook had advertising revenue of $1.86-billion in 2010, an 86% increase from 2009.

As much as I have my reservations about Facebook’s approach to privacy, there is no doubt it is becoming a more interesting advertising platform, particularly for smaller companies with limited budgets. In the past few months, I have been encouraging a growing number of clients to consider Facebook ahead of AdWords and other advertising opportunities. My interest in Facebook is driven by the following:

1. It’s inexpensive. For now, Facebook’s advertising model is volume-based. For the clients I have put on Facebook, the pay-per-click rate has been less than a $1.
2. Even if someone doesn’t click on an ad, the use of good creative means it can still register and make an impression on people. In some respects, it’s like billboard advertising; you can do anything with a billboard but it does make an impression. One client attracted 1,200 click-throughs on their ad but it was delivered more than two million times.
3. Facebook advertising is targeted, which means ads can be delivered based on specific demographics, interests and locations. Facebook’s doggedness to get more data from its users is driven by the fact advertising like the ability to target consumers.
4. Starting a campaign is quick and easy. It can literally be done in minutes, and you can cap your daily budget and pay by credit card.

All of these variables make Facebook an interesting proposition for many consumer-facing companies looking to reach out to consumers in a cost-effective way. By being able to filter through Facebook’s more than 600 million users around the world, companies can offer advertising that has a better chance of being seen and clicked on.

The downside to advertising on Facebook is many people don’t see Facebook as an advertising medium. It’s a place to communicate with friends and family, which means many ads are completely ignored.

The upside for advertisers is the ambivalence about advertising on Facebook means it’s pretty cheap to run a campaign. I’m sure Facebook would like to increase its prices but if that happens, Facebook lose some of its appeal for small advertisers looking for a way to embrace online marketing.