Facebook's advertising revenue jumped a whopping 69% to $3.2 billion dollars within the past year. This past week Facebook CEO Mark Zuckerburg announced that they will filing a $5 billion dollar IPO. How can advertising agencies capitalize on this social networks capabilities to better position the brands that they endorse? We would love to hear your thoughts... tweet about it @futureagencies #futureofagencies
Even though Facebook has barely gotten started when it comes to advertising, the company can thank Madison Avenue for the stunning $5 billion initial public offering (IPO) it filed on Wednesday (Feb. 1). Advertising dollars accounted for 85 percent of Facebook’s $3.7 billion in revenue for 2011, and U.S. advertisers alone contributed 56 percent to the company’s 2011 revenue pile, per the SEC filing.
Facebook’s total revenue swelled by 88 percent from the prior year, with revenue from advertising jumping by 69 percent to $3.2 billion. Yet according to Debra Williamson, analyst at eMarketer, Facebook’s ad business still has “an uphill battle” in terms of attracting major advertisers, but it could bolster the business by launching its own ad network.
“Facebook is distributed across the Web and has all the pieces in place [to run an ad network],” said Williamson. But, she noted, "Every time I ask them about it, they say no.”
Avi Savar, founding partner of social agency Big Fuel, said that Facebook has “barely scratched the surface of what they can do with advertisers.” He added, "Most brands still live in a CPM world.”
For example, Facebook claims an amazing 425 million mobile users, yet the company has yet to run a single mobile ad. “We believe that we may have potential future monetization opportunities such as the inclusion of sponsored stories in users’ mobile News Feeds,” reads the S-1 filing. Bloomberg reported in December that Facebook plans to start running mobile ads by the end of March.
Aside from advertising, games played on Facebook drove a significant chunk of the company's revenue. Social gaming giant Zynga alone accounted for 12 percent of Facebook’s overall 2011 revenue. And last July, Facebook began requiring game developers to use Facebook Payments when executing transactions via Facebook's platform. As a result, revenue from payments and other fees chipped in $557 million to Facebook's bottom line in 2011, a surge of 425 percent versus 2010.