Facebook’s Ad Revenue Is Slowing Down – Are Marketers Looking Elsewhere?

Facebook-declineLast week we reported that Facebook saw a decline in unique visitors over the past six months, indicating perhaps that the craze is starting to level off for users. Now reports have surfaced that show Facebook's United States advertising growth slowing down to a third of what it was in 2011. After growing at highly impressive rates during the first three quarters of 2011 (dancing around the 60% range), advertising growth fell by more than half to 30% in the fourth quarter of 2011, and early parts of 2012.

According to a report by the IDC, the growth rate went down to 21.2%. This has resulted in Facebook losing market share, and after retaining close to 14% of display advertising at the end of 2011, Facebook's market share is now down to 12%.

The author of the report and Vice President of Media and Entertainment at IDC, Karsten Weide, told the LA Times that there are two main reasons for the slowing growth:

For one, Facebook did not create its own segment, unlike Google with search advertising. Instead Facebook decided to enter a populated display advertising market, in turn, limiting growth. And secondly, advertisers are realizing that display ads on Facebook are simply not that effective.

"The effectiveness of advertising on Facebook is just really terrible," Karsten said. "Advertisers are realizing that Facebook isn't as effective as they first thought. They're pulling their money and taking it elsewhere."

Karsten’s words comes as the social marketing analytics firm 33Across reports that client advertising agencies and brands are beginning to focus less of their attention on Facebook compared with the rest of the Web. Surveying 2,200 agencies and brands in June, 80% of respondents said the “rest of Web” receives more of their team’s attention now than Facebook (up 11% from March).

Despite these numbers, it’ll be hard for marketers moving forward to ignore a platform that houses nearly a billion pairs of eyeballs. While many users have been complaining lately that Facebook is starting to become more like MySpace (in the sense that the focus is on advertiser interests, and not so much on the user experience), there has is no other platform where consumers so willingly to spill out their tastes and information to marketers. Facebook’s user data will continue to be instrumental to marketers, despite the click rates.

Hisham Dahud is a Senior Analyst for Additionally, he is the head of Business Development for Fame House, LLC and an independent musician. Follow him on Twitter: @HishamDahud

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  1. Great article! I’ve found FB ads to be very effective in growing your Page, but the problem is that once those fans are there, the Page posts likely don’t show in their news feeds, which equates to no engagement. Getting the like is only the first step in the process; engagement is the key. In my opinion, FB needs to adjust EdgeRank to allow users the opportunity to see the posts from Pages they’ve liked. Of course, many fans won’t see the posts anyway, due to not being signed in or age of the post, but I believe the opportunity should be in place. If the Page shares substandard content, users are savvy enough to click the unlike button. FB is going to, at some point, care about the small business advertisers, and not just the big brands.

  2. Carole– I agree. You can pay to get fans very effectively. But you have to keep paying to get into the newsfeed– very effective, too, but can be expensive. Nurturing fan growth and engagement is a paying proposition.
    That said, we’ve had an excellent experience running mobile ads on Facebook– CPM is up to $9, but the CTR is more than proportionately offsetting it.

  3. What really cracks me up is how quickly Zuckerberg shat on us right after his movie and getting Time’s man of the year award, LOL! Such a brilliantly timed FU to the whole world.
    I spent 4 years organically acquiring 4000+ fans. Now I have to pay for them to see my posts. Just another reminder of the importance of having your own, independent presence (website), that is not subject to the whims of shareholders.

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