Facebook widens lead in display ad market share

Ahead of its Facebook's rumored filing for an initial public offering (IPO) this week, the company has seen both bad news and good news. This is more of the latter. It appears Facebook is widening its lead in the display advertising: more than 1 in 4 of all U.S. display ads are from the social networking giant.

More specifically, Facebook's captured 27.9 percent of the U.S. display advertising market in 2011. It had just 21 percent a year earlier, according to comScore. Facebook surpassed Yahoo in its share of display ads in 2009. Now it has more than double Yahoo's market share in 2010 and 2011: 10.9 percent and 11 percent, respectively. Both Microsoft and Google finished 2011 with less than 5 percent.

Facebook had a tough time convincing Madison Avenue to put their dollars into social media, but the social networking giant eventually managed to pull it off. "If you go back several years there was some hesitation for a lot of brands to advertise on social media," comScore analyst Andrew Lipsman told The Wall Street Journal. "That's really changed."

Facebook's main source of revenue is its online advertising business, so its market share performance is closely watched for growth. While it is doing very well in display advertising, it is still just a small player in the overall online advertising market. Last month, we learned Facebook had just 3.1 percent market share of global advertising expenditure in 2010, though it did double from 2009. Ahead of Facebook were of course Google, Yahoo, and Microsoft.

Still, 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. Facebook marketing executives often argue that the social network's ads are more effective than alternatives because they often come from a friend.

See also:

• Facebook testing seven ads per webpage
• Facebook starts displaying ads in the News Feed
• Over half of Facebook users respond to social media marketing
• Women more likely than men to click on Facebook ads
• Facebook made $1.86 billion from your content in 2010
• Facebook testing coupons as premium ads