Facebook: advertising rates staying constant even as inventory rises

Facebook says advertising rates are staying constant even with rising inventory.
Written by Emil Protalinski, Contributor

Without disclosing actual numbers, Facebook has announced that its advertising rates are staying constant, despite the fact that the company recently added new ways for marketers to promote products. There has been concern recently that prices would decline as inventory surged, but it appears that demand is keeping prices level.

Rates for sponsored stories, which are sold through an automated auction system and account for most of sales, have not changed since March 2011. That's when the company added promotions under photos and increased the number of advertising spots on some pages from three to as many as five.

"We have hundreds of thousands of advertisers around the world -- that continues to grow, David Fischer, vice president of Facebook's advertising and global operations, told Businessweek. "We continue to feel good about where we are. We're constantly testing new ad formats. We've found, frankly, that users are getting value and advertisers getting value in putting more ads in."

Fischer says the company makes sure that new advertising features don't drive users away. To fight back competition from the likes of Google and Twitter, Facebook needs to keep helping advertisers reach the social network's 750 million users effectively by sustaining advertising prices. At the same time, Facebook must also avoid annoying its surging user base with a deluge of ads.

About 60 percent of Facebook's advertising revenue comes from sponsored stories – companies bid for spots on user's profile pages based on those people's demographics or interests. The remaining revenue comes from ads placed on the Facebook homepage, where users typically begin sessions on the site, and these spots are sold by Facebook's in-house marketing staff.

Earlier this month, we learned that Facebook made an estimated $1.86 billion from user-generated content in 2010. This number was more than YouTube and all other social media sites combined made last year.

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