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Facebook could control a bigger ad market than Google, says COO
Facebook can tap into a portion of the ad market that is larger than the search ad sector which has provided Google with huge revenues and profits, according to Facebook COO Sheryl Sandberg. Whereas Google’s search ad products succeed by matching ads to user queries, Sandberg says Facebook can become involved in the far more lucrative business of creating demand.
“If you look at global ad spend it’s about a USD640bn annual business,” says Sandberg. “Where we are playing in the ad market is in that demand generation, which is the top 90% of the funnel.” She says Facebook will tap into this large ad market with novel ads, and could well succeed if it exploits the detailed targeting information at the social network’s disposal.
Sandberg’s comments reveal Facebook’s grand ambitions. The site is on its way to becoming as dominant in the social networking space as Google is in search, having far outstripped its competitors to rack up more than 300m members worldwide. Facebook recently surprised analysts by announcing that it is cash-flow positive well ahead of schedule. The network now supports a number of secondary businesses including the rapidly expanding social gaming market, which is thought to be worth as much as USD500m a year on Facebook alone.
Sandberg says Facebook is learning from Google’s approach by tailoring its ads to the content on the site, in much the same way Google matches the style of its adverts to the style of its search results. However, Facebook will face a difficult time persuading advertisers that their money is as well spent on the network as it is on search ads. Though measuring the “final click” that Google bases its advertising fees on is a relatively easy process, tracking the influence of adverts designed to create demand is far more difficult. Display advertising is currently at a disadvantage as that its impact may not result in an immediate and traceable sale.
