Facebook Inc (NASDAQ:FB) Ad Campaign is gathering momentum, but this is more of a benefit to the social media giant than a damage to Google Inc (NASDAQ:GOOG). The social networking company has been working on a number of ad monetization campaigns during the second half of 2012, and they now seem to be paying off. The company has introduced sponsored stories (direct response ads), promoted posts, and Facebook Ad Exchange (FBX) in the latter part of Q3.

Facebook new ads

In a report published Monday, Baird Equity Research analysts, Colin Sebastian and Gregor Schauer, noted, “advertising trends on Facebook Inc (NASDAQ:FB) are improving, in particular as the site taps into more “direct response” ads as opposed to strictly branded advertising,” in reference to a conference call analysis with one of the leading Search Engine Marketing (SEM) companies, Covario.

The analysts also noted that according to the data obtained, SEM business started slowly for Q4, but peaked in the second half of the quarter. The analysts wrote, “it appears Q4 started softly in October and early November, although we note that recent positive e-commerce trends should help boost search trends for the full quarter”.

The analysts also noted that Google Inc (NASDAQ:GOOG) ‘s Paid Listings Ads (PLAs)are doing well, but consequently, cannibalizing on the highly profitable/expensive Google AdWords revenue. The analysts noted, “Google’s paid PLA (product listings ads) are showing strong early results for merchants, with higher CTRs (click through rates) and conversion rates; however, advertisers do not appear to be increasing their Google budgets overall, suggesting some cannibalization from traditional, paid search”.

The analysts are of the opinion that ads in the Facebook “News Feed” continue to gain more coverage and should more than double sequentially in Q4. The analysts also pointed out that, following the change in privacy policies, as well as the introduction of FBX and remarketing capabilities, there are some indications of ad budget re-allocation from paid search to newer Facebook formats. The companies are reducing their paid search budgets while increasing the Facebook format ads budgets.

However, this is not likely to spook Google Inc (NASDAQ:GOOG) ad revenues materially, but will be such a material improvement on Facebook Ad revenues, according to Baird Equity Research analysts. They wrote, “we expect that the gain is more material for Facebook than a loss for Google, given the overall growth in both markets and Facebook’s still relatively smaller size”.

In some recent statistics Facebook Inc (NASDAQ:FB)’s Ad revenue from sponsored stories is expected to notch $1 billion on its first 12 months. Google Inc (NASDAQ:GOOG) PLAs are expected to continue cannibalizing AdWords revenue, while Q4 SEM business is expected to reports 25 percent growth year-over-year, which is a slight decline quarter-over-quarter.

The analysts concluded, “we note that both e-commerce and online advertising have two important weeks ahead, and will likely make or break the quarters for our covered companies. On balance, recent positive trends suggest there is still some possible upside vs. consensus estimates for most of our covered companies”.

Facebook Inc (NASDAQ:FB) closed at $28 per share while Google closed at $698.37 on Friday.