Display ads in social media have been getting a bad rap for awhile now. While many brands have had success marketing on social networks, purchasing display ads in the space does not always appear to be a great investment.
But this week, Facebook announced that it has positive cash flow for the first time. The company met the 300 million user milestone this month and has reached profitability ahead of schedule.
While the company has gotten some bad press for the slow growth of its ad business, clearly some companies are finding success by investing in Facebook display ads.
So what advertisers are making bank on the social net?
While social users enjoy clicking around on lots of things on
Facebook, things they don’t like clicking on are ads. Click through
rates on social networks are often below 1%.
But this Spring, Business Insider and Fred Wilson estimated Facebook’s reveneu to be around $550
million, with $125 million coming from brand ads, $150 million from Facebook’s ad deal with Microsoft, $75 million from virtual goods and $200 million from self-service ads.
The consistent revenue stream from Microsoft is certainly helping Facebook’s bottom line, but smaller advertisers are using the service and — importantly — returning for more.
Facebook’s self-serve ad platform may not be returning good results for everyone, but for certain marketers, it’s been plenty profitable. According to Inside Facebook:
“Performance advertisers,” the sorts of businesses like online
education company University of Phoenix, are finding that ads on
Facebook can be targeted so precisely that they are getting a clear
return on investment. The right sorts of people see the ads, click, and
sign up for an online course or whatever.
Another winner on the platform is local advertising. By targeting Facebook users near their stores, local advertisers are seeing impressive increases in sales at their stores. According to Inside Facebook, the social network has been increasing the value of its advertising through its expanding profile and targeting based on its users’ activities:
“In terms of how what we hear versus what the July reports said, we
believe that brand ads and especially self-service ads are driving
almost all new growth. As one source put it, the advertising team is ‘beating the shit out of its numbers.'”