We all know Google dominates the Internet advertising space, while its three traditional competitors, Microsoft, Yahoo, and AOL, are floundering at the bottom. Many seem to forget, however, that the new guy on the block, Facebook, is starting to rise up from underneath the failing trio. In fact, the social networking giant managed to double its advertising market share from 1.4 percent in 2009 to 3.1 percent in 2010, according to the ROI agency ZenithOptimedia.
A closer look shows that between 2006 and 2010, Facebook is the only one to have steadily gained market share in terms of Internet advertising expenditure: from 0.2 percent to 3.1 percent. Google had a minor hiccup in 2009, but overall it is very quickly gaining share. As you can see in the chart above, the other three have all failed to gain market share every single year.
Facebook is still a far cry from Google, but at this rate it will quickly overtake Microsoft by the end of this year. If it doesn't take second place from Yahoo this year, it most likely will in 2012. This is all assuming that the pact formed by Yahoo, Microsoft, and AOL doesn't turn things around for them.
It's not too surprising that Facebook has managed to establish itself as a major advertising supplier: the company has a unique offering to businesses that are willing to gamble a little with their marketing dollars. Many are finding advantages, such as being able to target users with a precision not found in most other forms of advertising, and are thus increasingly investing in Facebook pages and Facebook apps instead of spending their budgets on Yahoo, MSN, and AOL. With its quickly growing user base (800 million monthly active users and counting), the company's social graph is exploding across all demographics, which only further fuels improved ad targeting, performance, and revenue as well.
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- Facebook's advertising business: CPM up 60% (report)
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- Facebook may have missed revenue projections by $500 million
- Facebook made $1.86 billion from your content in 2010
- Facebook: advertising rates staying constant even as inventory rises
- WSJ: Facebook growth exceeds expectations, $100 billion valuation justifiable