New, potentially lucrative advertising opportunities are coming to Facebook as a prelude to its initial public offering of stock. The idea is to lure big brands with the promise of effective, precisely targeted ads that reach the social network's 845 million users.
Facebook has invited marketers and journalists to an event today at the American Museum of Natural History in New York. It's a rare East Coast appearance for the Silicon Valley social-networking company.
Though Facebook hasn't said exactly what will be discussed, it is widely expected to release new ways to advertise on its website and possibly on mobile devices.
Facebook has a vast trove of information about its users' lives, hobbies, likes and dislikes, yet the company has kept advertising fairly unobtrusive to date. Ads for teeth-whitening, wineries and laundry detergent and the like are relegated to the right side of users' Facebook pages.
"Facebook is making serious money from ads right now, but they are not making serious money from major brand advertisers, and that's where the ad money is," said Rebecca Lieb, an analyst with the Altimeter Group.
"They currently have rather low-rent, shoddy ads on Facebook." With an IPO looming, however, there is pressure to prove that Facebook is worth the USD 75 million to USD 100 million that will be demanded once it goes public this spring.
That's where the big brands come in. Nestle, Procter & Gamble and other big brands don't want to be relegated to the sidelines, Lieb said. Facebook will try to integrate ads into people's experience, so that friends' posts about brands are showing up alongside their news links and puppy photos.
"Consumers are really tuning out advertising," Lieb said. According to research firm eMarketer, Facebook has a 14 per cent share of the USD 12.4 billion display advertising market in the US last
year.
This year, it's expected to grow to 16.8 per cent, surpassing Google's 16.5 per cent. In all, eMarketer estimates that Facebook's advertising revenue will hit USD 5.06 billion this year, accounting for 83 per cent of its total revenue.