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Facebook Revenues to Reach $4.27 Billion in 2011

Ad revenue to reach $3.8 Billion this year as earnings from Credits grow

NEW YORK, NY (Sept 20, 2011)—Global revenues at Facebook will reach $4.27 billion in 2011, up from $2 billion in 2010, according to a new forecast by eMarketer.

eMarketer estimates Facebook will earn $3.8 billion worldwide this year in advertising revenue, up 104% from $1.86 billion in 2010. Revenues from Facebook Credits are expected to reach $470 million in 2011, up from $140 million last year, eMarketer estimates.

“Facebook’s revenue streams will continue to diversify, with ads representing a decreasing proportion of total revenue while other sources such as Facebook Credits will grow,” said Debra Aho Williamson, eMarketer principal analyst.

Ads, which represented an estimated 95% of Facebook’s total revenue in 2009, will fall to 89% of total revenue this year, eMarketer estimates. Revenue from Facebook Credits will grow to 11% of the company’s total revenues in 2011, compared to 7% in 2010.

While eMarketer’s previous forecast from January 2011 had estimated Facebook would earn $4.05 billion worldwide in ad revenue this year, “this slight revision downward for 2011 should not be taken as a sign that Facebook’s overall business is losing momentum,” said Williamson.

eMarketer estimates Facebook will slightly surpass earlier expectations in 2012, earning an estimated $5.78 billion worldwide in ad revenue that year. eMarketer had previously estimated Facebook would earn $5.74 billion.

Despite a positive outlook, Facebook will continue to have to prove to advertisers that its products deliver results.

“Even though Facebook has spent several years wooing marketers, many of them still believe the ads aren’t effective at driving clicks and other actions,” said Williamson. “Facebook must either work to improve its clickthrough rate or show advertisers that advertising on the site is effective even without a click or other action.”

Many marketers also still believe they can successfully engage consumers on Facebook without spending a great deal on paid advertising.

“Having amassed a large quantity of ‘likes,’ some brands feel that they can continue to market to these people directly through their pages rather than by buying advertising on Facebook,” said Williamson. “This may especially be the case for companies that market to Facebook’s younger users, because they tend to be more willing to ‘like’ or comment on brand pages.”

The company has also taken steps in recent months to streamline its ad inventory to make a better experience for users, which contributed to eMarketer’s slight downward revision for 2011, Williamson

Facebook is expected to earn $2.01 billion in US ad revenues in 2011, eMarketer estimates. The company’s share of the $12.33 billion US display ad market will reach 16.3% in 2011. eMarketer’s estimates for US display ad revenue at Google, Microsoft, AOL and Yahoo! were not affected by this forecast.

eMarketer forms its estimates for advertising spending on Facebook through a meta-analysis of estimates of consumer usage, marketer usage, ad pricing, and impressions on Facebook, as well as revenue estimates from research firms and other sources. eMarketer also conducted interviews with industry executives who provided perspective on Facebook’s advertising business and revenues.

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Posted on September 20, 2011.