REPORT: Facebook’s Focus On Direct-Response Advertising, And Its Impact On Revenue

6Corks650How will Facebook’s announcement last Thursday that it will target ads to its users based on websites they visit and applications they use impact its ad revenues going forward? Favorably, according to market researcher eMarketer.

eMarketer projected that the social network’s worldwide advertising revenues will jump 56.4 percent in 2014, reaching nearly $11 billion, accounting for a 7.8 percent market share of global digital ad spending, up from 5.8 percent in 2013 and 4.1 percent in 2012.

eMarketerFBAdRevenuesWorldwideChart

The researcher also projected that global digital ad spending will reach $140.15 billion in 2014, up 16.74 percent from the previous year.

Facebook’s new focus on direct-response advertising is seen by eMarketer as an attempt to compete more effectively with Google, as more than 70 percent of worldwide digital ad spending and almost 60 percent of ad spending in the U.S. goes toward direct-response campaigns, but the social network has work to do, as Google’s market share of U.S. advertising was 39.7 percent last year, compared with just 7.6 percent for Facebook.

eMarketerDigitalAdRevenuesByChannelChart

eMarketer also cautioned that many advertisers on Facebook are still using the social network’s advertising to increase engagement, rather than for direct-response campaigns.

Principal Analyst for Social Media Debra Aho Williamson wrote in an email to AllFacebook:

Companies still see Facebook as a platform for social brand interactions, but that’s no longer the way Facebook is presenting itself. Facebook has moved on, but many brands are still marketing there the same way they did two years ago.

The more data advertisers have on their customers, the better. But figuring out how to make the most of Facebook’s targeting capabilities will be an ongoing process, and there will be a learning curve. Facebook’s targeting is getting very sophisticated, and advertisers can segment audiences into smaller and smaller buckets, but many brand advertisers are more accustomed to buying ads aimed at mass audiences.

Facebook’s direct-response pitch isn’t new, but it’s certainly stronger. Facebook is smart to tailor solutions for those marketers, but it needs brand advertisers, too — especially as it continues to market itself as an alternative to TV.

Readers: Will Facebook be able to snag market share from Google?

Image courtesy of Shutterstock.

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