Up until now, Facebook’s monetization efforts have focused solely on its social network platform. Revenue from Facebook.com – largely based on ads – were approximately 3 billion during the 2011 fiscal year. However, Facebook inevitably will need to expand its reach beyond Facebook.com if its ever going to live up to the financial promise of its record setting IPO.
The online ad market is a massive multi-billion dollar market dominated by one brand – Google Adsense. In the 4th quarter of 2011 alone, Google’s Adsense product generated 2.8 billion dollars in revenue for the internet search giant. While the strength of Adsense is its unique targeting platform and established base of millions of publishers and advertisers, Facebook has all the tools and resources to launch an ad network that can match Adsense advertiser for advertiser, publisher for publisher, and dollar for dollar.
Can Facebook Succeed?
Knocking Adsense off its online advertising throne will certainly not be easy. Adsense revolutionized display ads 10 years ago and has dominated the market ever since. The biggest problem facing Adsense competitors is that the efficiency of Adsense’s targeting algorithm, its massive database of user demographics and analytics, and most importantly – its huge pool of advertiser and publishers – means that competitors simply cannot pay website owners and bloggers as much as Adsense can.
Facebook on the other hand already has access to millions of paying Advertisers at Facebook.com. As for publishers, millions of webmasters and bloggers around the web already implement the Facebook “like” button. It wouldn’t be too much of a stretch to see publishers flocking to a Facebook driven ad network – provided Facebook can offer payouts that are competitive with Adsense.
Unlike past competitors, Facebook actually has the resources and access to advertisers, publishers, and demographic data to make a run at Adsense’s online advertising throne. But although Facebook may have all the tools in theory, in practice the battle for online advertising supremacy could play out in any number of directions. While it seems likely that Facebook will be able to carve out a portion of the display ad market, whether they can take a significant chunk out of Google Adsense’s marketplace dominance remains to be seen.
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