Facebook has become a more troubling competitor to the major portals -- MSN.com, owned by Microsoft (MSFT), Yahoo (YHOO) and AOL (AOL), parent company of DailyFinance. The social network tends to charge less for ads to reach a portion of its 500 million users. Now, it turns out that Facebook is doing better with large, mainstream advertisers than many analysts had thought.
In a interview with Bloomberg, Facebook Chief Operating Officer Sheryl Sandberg said, "Some advertisers have increased spending by as much as 20-fold or more." She added, "Two years ago the big brands were experimenting with us. They started buying with us a year ago. Now, they're going big." She did not disclose names of any of the marketers, but the news service points out that Facebook's customers include Coca-Cola (KO), JPMorgan Chase (JPM) and Adidas AG.
Some industry analysts believe that privately held Facebook's revenue will double this year to $1.4 billion. While this amount may not seem like much, it compares with AOL's 2009 revenue of $3.3 billion and Yahoo's sales of $6.4 billion. Most of Facebook's revenue comes from display ads rather than search-related ads.
A number of large Internet sites supported by ads, not just the three portals, have to be concerned about Facebook's growth. It now ranks fourth among all Internet destinations in the U.S. and had 141 million unique visitors in June, which compares to AOL at 107 million and Microsoft sites at 161 million.Since total display advertising is the U.S. is not doubling each year, Facebook is gaining significant market share.
Facebook has hinted it will not have an IPO until 2012. It may as well wait. With tremendous revenue coming from advertising, it does not need the money.
Understanding Stock Market Indexes
What does it mean when people say "the market is up 2%"?View Course »