One of the cornerstones of Facebook Inc (NASDAQ:FB)’s earnings is its ad revenue. During the first quarter of the year, the company’s internet ad sales hit an all-time high. But just what is a “like” on Facebook really worth to advertisers? No one knows, apparently.
A Report On Social Media Advertising
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Business Insider’s Josh Lugar took a closer look at a report from BI Intelligence to determine just how much companies which advertise on Facebook Inc (NASDAQ:FB) has to gain from each one of those “likes” they receive.
It shows that the social media advertising industry is a high growth market. Some analysts estimate that by 2017, we’ll see social ad spending reach $11 billion, compared to last year’s $4.7 billion. Currently social media ad spending makes up just 1 to 10 percent of advertising budgets for most advertisers, although that percentage may grow if networks like Facebook can do a better job at quantifying advertisers’ return on investment.
Facebook Ad Revenue
According to the report, Facebook Inc (NASDAQ:FB) is the “clear market leader.” Major brands spent 57 percent of their social media ad budgets on Facebook in 2012, while YouTube and Twitter only managed to snag 13 percent of those budgets apiece.
In the fourth quarter of last year, 23 percent of Facebook’s revenue was made through mobile revenue. The report also found that the social network’s mobile ads had the highest click-through rates of all social networks by “a substantial margin.”
The Problem With Valuing Facebook’s ‘Likes’
According to the report, brands don’t know how to place a valuation on the “likes” they receive from Facebook Inc (NASDAQ:FB), and they’re not convinced that their spending on the network is effective. Analysts have apparently tried to calculate the potential value of those “likes,” but the numbers they come up with vary widely.
Out of the 3,000 marketers surveyed by Social Media Examiner this year, 41 percent of them said they didn’t know how effective their marketing on Facebook was. The same survey indicated that 17 percent of marketers felt that Facebook Inc (NASDAQ:FB) was ineffective in terms of marketing, while only 32 percent felt that it actually was effective.
Analysts at Jefferies upgraded Facebook last week because they were more optimistic about the network’s new ad products. However, it seems clear from the report released today that the company has a long way to go in terms of making sure its advertisers clearly understand what they’re getting for their dollars.