Tue Nov, 2010 by Derek Mehraban
A new Wall Street Journal article points to a discrepancy concerning FaceBook’s supposed advertising dominance. Almost a quarter of all display ads were shown on FB and yet FB only earns about 10% of revenues from display advertising. This discrepancy is because resolving ads is not what generates the revenue, rather converting those ads is what makes the money.
There has always been a concern that social networking sites may not be particularly good at converting ads, since there is more interesting stuff on the screen to occupy the viewer. Other sites do have a higher conversion rate than FB does, but FB does provides a level of targeting unparalleled on those other sites. FB discounts these concerns, claiming the discrepancy is due to FB’s lower fees for conversions. Of course, the response is that FB has to charge a discounted rate because social networking sites are not as effective at ad conversions.
Facebook Ad Photo Credit: uniquevisitor.net
For digital marketers, this is a valuable debate to follow. While FB can generate better targeting and a sheer volume of ads, it is important to note that there are more efficient advertising possibilities out there.