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Facebook Passes Yahoo! in Display Advertising

Long-Term Display Competition Heats Up With Google

NEW YORK, NY (June 20, 2011)—Facebook will leap over Yahoo! in US display ad revenues this year, while Google will remain the third-largest seller of display ads, with Yahoo! at No. 2, according to a new forecast by eMarketer.

eMarketer estimates Facebook’s share of US online display ad revenues will grow to 17.7% in 2011, up from a 12.2% share last year.

“Facebook’s distinctive form of display advertising is increasingly attracting advertisers. These are mainly smaller companies, and some of them have a strong direct-response focus,” said eMarketer principal analyst David Hallerman. “Google is going after many of the same advertisers to some extent, and this is where one facet of the competition between them will heat up.”

“However, with the vastly different advertising experience each company offers, many marketers will run display ads on both platforms,” he added.

Facebook is expected to see the biggest influx of new display dollars than Google in 2011, with expected growth of $978 million in additional display revenues—more than display revenues will grow this year at Yahoo!, AOL, Microsoft and Google combined.

US display advertising revenues at Google will top $1 billion for the first time in 2011, as the company’s share of overall US display revenues grows to 9.3%, eMarketer estimates. That’s up from an 8.6% share in 2010, when Google’s US display revenues grew an estimated 140.5% to $855 million. By 2012, however, Google will be essentially in a dead heat with Yahoo!, while Facebook will represent about one in five display ad dollars.

“Google’s display revenue gains will come from three main sources: large advertisers that are already Google customers, the range of small or medium-sized businesses that have relied on search for years but are looking to expand their reach, and large-brand marketers looking to YouTube to widen their video advertising reach,” Hallerman said.

Display business at Yahoo!, Microsoft and AOL will also grow this year, although each company’s market share will decline as a result of Google’s and Facebook’s huge rise. Yahoo!’s share of the US display ad market is expected to decline to 13.1% in 2011, down from 14.4% in 2010, eMarketer estimates.

“With a projected 13.6% growth rate in 2011, Yahoo!’s display business is growing nicely—or so it would seem at first glance. But with the total display market set to increase by 24.5% in 2011, supported by even higher gains at Google and Facebook, the growth at Yahoo! looks more like a poor showing than a good one,” said Hallerman.

“That’s a powerful indicator of how vibrant today’s display market is, when a company like Yahoo! can increase revenues by a normally healthy rate yet still lose market share,” he added.

Net US display revenues at Microsoft are expected to grow 18.7% to $602 million in 2011, up from $508 million in 2010—though the company’s share of the overall US market will fall to 4.9%, down from 5.1% in 2010, eMarketer estimates.

Despite AOL’s continued display push, eMarketer estimates US display ad revenues at the company will increase by just $50 million this year, as total display revenues grow 10.5% to $522 million from $473 million in 2010. As a result, the company’s share of overall US display ad revenues is expected to fall to 4.2% this year, down from 4.8% in 2010.

eMarketer forms its forecast though a meta-analysis of reported revenues from major ad-selling companies, results from its benchmark source—the IAB/PwC—and research estimates and methodologies from dozens of firms that track ad spending.

The estimates in this forecast for Facebook advertising revenues were calculated in January 2011, though this revision has adjusted the company’s market share figures downward to account for the dramatic growth forecast in eMarketer’s June 2011 US online advertising estimates, especially in the display category.

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Posted on June 20, 2011.