Advertising accounts for 85 per cent of Facebook’s revenue
CALIFORNIA: Facebook (FB) Inc said on Tuesday it now has one million active advertisers globally who used the platform in the last 28 days, a milestone for the company that is seeking to revive its revenue growth. A vast majority of those advertisers are small business owners who have flocked to the world’s number one social network. FB executives are hoping to net even more small advertisers since 16 million local businesses, ranging from jewelry sellers to clothing stores, set up free pages on the network.
While pinpointing how much money small advertisers spend only online is difficult, in total they spent approximately USD 32 billion during 2012 in the United States, according to market research firm eMarketer. “Most small business owners start off as FB users, then migrate to become page owners, and from there migrate to become advertisers,” said Dan Levy, FB director of small business. He said that FB does not plan to start charging businesses to set up pages.
Advertising accounts for 85 per cent of FB’s revenue — which also includes dollars from the world’s largest brands and advertising agencies. But the company is trying to spark its ad growth following a sharp slowdown last year. Last quarter, FB reported first-quarter revenue of USD 1.46 billion. Advertising revenue rose 43 per cent, the fastest growth rate since the end of 2011. FB declined to break out how much ad revenue comes from small businesses and did not indicate how long it took to reach the one million milestone.
It has introduced several initiatives to help boost growth, including an overhaul of its newsfeed and changes to how advertisers buy ads on the network in order to simplify the process. Small business owners are ‘critical’ to FB’s success, said Brian Wieser, an analyst with Pivotal Research Group. “Once they launched new ad products targeted to small businesses in the middle of last year, they were able to significantly accelerate their revenue growth,” he said. Kim Caulfield, a small business owner in Orange Country, California who sells custom jewelry made from horse tail hair, started using FB advertising to reach more customers for her company Tail Spin. “You only can invite so many of your friends over and most of them don’t own horses,” she said. She now spends approximately USD 25 a day with FB on advertisements directed to horse enthusiasts with the potential of reaching over five million people. FB also reached out to local businesses order to help them through the process. — Reuters
