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Social media advertising may still be seen as chump change by some, but brand advertisers like what they see on Facebook. And according to the company's Chief Operating Officer Sheryl Sandberg, many large brand advertisers have increased their ad spend on the social network by 20 times or more.
If Facebook can retain — and even grow — its userbase over the next few years, the site may soon be stealing large brand contracts from larger digital publishers.
On Wednesday, Sandberg told BusinessWeek:
“Two years ago the big brands were experimenting with us. They started buying with us a year ago. Now, they’re going big.”
Sandberg also says that some of the social network's biggest advertisers have increased their spending with the network by at least 10-fold in the last year.
That's especially interesting considering that Facebook's new dominance in display is thought to be built on the back of small advertisers. Facebook's self-serve display product helped the company topple Yahoo as the biggest provider of display advertising online this year.
Facebook took 16% of the display ad market in the first quarter of 2010, up from 11% in the fourth quarter of 2009, according to comScore.
But the ads they're selling are also cheaper. comScore estimates that Facebook and MySpace brought in an average CPM of only 56 cents last year, compared to the $2.43 average for most advertising inventory online.
If the company can court large brand advertisers, it will be an even stronger player online. And according to Sandberg, that's what they're doing. As she says:
“A movie studio last year that did three movies with us -- this year, if they’re releasing 12 movies, they’ll do 10 of them with us. A company that did one product launch with us -- this year they’re going to do half of their product launches.”
That's why Facebook estimates that its sales could rise to at least $1.4 billion in 2010 from between $700 million and $800 million last year.
However, Facebook ad prices have remained steady over the last year, which is sure to concern competitors.
Keith Lorizio, Microsoft's newly installed head of U.S. sales told AdAge recently:
"Social networks are going to be a challenge for everybody, as the sheer dominance of the impressions they're making flood the marketplace with inventory. And it's especially a challenge for every publisher, as they drive down CPMs."
If Facebook is recruiting large brands to the site, it's because they are seeing good results. And good results are worth paying more money.
For the social net to become a major player in major brand plays online, it has to even further cement its dominance in social. Already, the site has 500 million users. But the site's ongoing display success depends on maintaining the existing userbase. And making it even bigger.
As Michael Gartenberg, a partner at researcher Altimeter Group, tells BusinessWeek:
“Facebook’s value is being able to preserve that user base. Those 500 million users -- advertisers not only want to make sure that those people aren’t churning and that they’re actually using their accounts, but that there’s growth here as well.”