Facebook Inc (NASDAQ:FB) collects less than 5% of the $500 billion spent on advertising annually. The social media giant must dominate emotional ads, a segment that made television the world’s dominant marketing force, and the precision type of ads that built Google to achieve the dreams of founder and CEO Mark Zuckerberg, according to The Seattle Times.
Good at one
So far, Facebook Inc (NASDAQ:FB) has cracked the second half of the equation by following in the footsteps of Google and locking down “direct response” advertising. For instance, if someone has a store in California that sells books, then he/she would want to find people who are in the market for purchasing books. If someone types “books California” into Google, the the store can then pay to show its link.
Direct response ads make up a large portion of online advertising as they make it easy for companies to find people who are looking for exactly what they are selling. Facebook Inc (NASDAQ:FB) is good at this type of advertising as well because people tell the social networking site who they are and what they like. But is dominating direct response ads (along with Google) enough for the social networking giant? No.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring Andurand's oil trading profits surge, Bridgewater profits from credit, and Tiger Cub Hedge Fund shuts down. Q1 2022 hedge fund letters, conferences Read More
Facebook (FB) needs to dominate this lucrative segment also
On TV commercials, around $200 billion is spent annually, mostly on branded advertising. Brand ads, for instance, include commercials of smiling families traveling by an Audi through a mountain range, the report says. Brand ads make up a large part of advertising apart from the Internet. Also they are lucrative. According to analysis from Bloomberg Intelligence, the average price to reach 1,000 people with a prime-time TV ad in 2015 was $50. In comparison, the ad price on Facebook Inc (NASDAQ:FB) was $5, the report says.
Facebook Inc (NASDAQ:FB) wants these brand ads desperately. The social media giant is like the Super Bowl every night for advertisers and their $500 billion in annual spending, said Sheryl Sandberg, Facebook’s Chief Operating Officer. This could be wrong though, the report says, adding that more than 1.1 billion people use the social network daily, and around 110 million users watch the Super Bowl telecast.
Procter & Gamble, the world’s biggest advertiser, told The Wall Street Journal that it found targeting niches like teenage shavers on Facebook generated too narrow an audience for P&G brands, which needs to sell millions of Gillette razors and bottles of Tide. P&G said it would not spend less money on the social media giant, but it and some other big advertisers appear to be falling back towards TV.