Blog Post

Can Facebook Control 5 Percent Of Online Advertising By End Of 2012?

While many of the top Internet companies faced a volatile ad market in the fourth quarter of last year, Facebook saw its share of the overall online advertising market increase to 2.7 percent during the period. In fact, by the time 2012 is over, the social network could control up to 5 percent of online ads. Look out, Google.

A new report issued by Efficient Frontier says brands like Pepsi are buying into Facebook primarily to acquire “fans.”

Pepsi is launching a campaign on the social network to search for the two biggest fans of Pepsi MAX and reward them with a lifetime supply of the drink. (Participants need to upload 60 seconds worth of video explaining their fanaticism about the soft-drink maker’s products.)

“As marketers improve their ability to acquire and engage Facebook fans, brands will continue to pump new budgets into Facebook to capitalize on the social network’s reach and the amount of time users spend there,” the report reads. “The increased spend will help companies improve brand awareness and drive the customer lifecycle amongst fans and non-fans.”

According to Efficient Frontier, this investment in Facebook and other social networks is “additive” to brands’ existing ad budgets and is not cannibalizing other digital media channels.

Still, the Efficient Frontier data arrived on the same day that Wall Street securities firm J.P. Morgan issued a report warning investors about weakness in the branded advertising sector for top ad-supported internet companies like WebMD (NSDQ: WBMD). The firm’s advisory, which was obtained by MediaPost, told investors to expect “mixed earnings” results for most of these companies.

Some other insight from the Efficient Frontier report:

— Mobile search accounted for 7-8 percent of all search advertising in the fourth quarter, up from 2 percent in the same period during 2010. The report attributes the uptick to the proliferation of tablets, which now account for half of mobile search ad spending.

— Overall search spending increased 14 percent in the U.S. and 19 percent in the U.K during the fourth quarter, with report tying the bump to aggressive spending by retailers.

— Impression costs for search advertising declined 5 percent across the board, with more brands migrating their dollars to the less expensive mobile sector.