Yesterday, AdAge.com published an article indicating that Facebook advertising sales growth is projected to decline year-over-year – from 104% growth this year to 21% growth in 2013. While 21% year over year growth is still good, it’s quite a significant drop from 104% two years prior. However, this doesn’t spell the end for Facebook’s revenue growth. The company is actually seeing a rapid increase in year-over-year sales for “Facebook credits.”
What this data might indicate is that there is a limit to how fast a company can scale the growth of display advertising revenue from brand-focused advertisers online. You see, many advertisers who are focused on “performance advertising” have seen a decline in click-through rates on Facebook ads over the years. At the same time, the cost-per-click for those ads has gone up. As a result, performance-driven advertisers have become less interested in Facebook campaigns.
While Facebook claims that it is making a play for branding and social CRM dollars vs. performance ad revenue, they haven’t quite yet figured out the best way to monetize social display advertising. As a result, it may be harder to scale brand advertising the same way that performance advertising can be scaled to date.
So, where is the lion’s share of online advertising dollars going today? While search and e-mail remain the most reliable channels for generating high ROI, there’s a new game in town that could turn the “traditional” online display advertising industry on its head. That game is called Ad Exchanges – which are basically platforms on which you can buy and sell display ads in real-time via an auction (similar to stock exchanges). This new method of media buying could change the rules and roles for all parties involved – including the ad agencies and media sales reps.
Over the past few months, I’ve met a lot of technology, media and analytics companies who are looking to get into this space. It’s definitely a trend worth watching. For more information about Ad Exchanges and how they could change the industry, check out this article entitled “Don’t Look Now: Classic Disruption Is Taking Place In Advertising,” from AdAge.com.
Stay tuned for future stories about this growing trend.