This week’s impending Facebook IPO, which could top $12.7 billion, is sparking questions about the value of Facebook and other social networks. The future of social media ad spending may justify the hype surrounding Facebook, which is geared to being the highest valued U.S. Internet company at IPO.
Facebook has received criticism about being overvalued. Critics point to the company’s ad model that doesn’t fully reach its 901 million users. Plus, investors worry about Facebook’s post-IPO growth. On Tuesday, General Motors pulled a huge $10 million advertising campaign from Facebook, citing ineffective ads.
Though there are hurdles, the BIA/Kelsey’s U.S Local Media Forecast predicts within four years, global ad spending on social media platforms will reach $9.8 billion from $3.8 billion in 2011. Social media ad revenue in the U.S. is predicted to jump from $840 million in 2011 to $3.1 billion in 2016.
Companies will drive the ad growth on social networks by incorporating more creative elements like video and pictures.
Facebook and Twitter are paving the way for the rise in online ad earnings, according to BIA/Kelsey. Both companies are making crucial changes to their advertising platforms that open doors for companies hoping to reach consumers online instead of offline.
“Facebook opening its ads API to more partners, including those that work with SMBs (small and medium businesses), and Twitter’s self-serve platform will help to ‘democratize’ social ads, which will ultimately lead to more local growth,” Jed Williams, BIA/Kelsey analyst and program director, states.
In Facebook’s IPO video presentation for potential investors, company COO Sheryl Sandberg spoke about Facebook’s new business model. Sandberg said the end goal is to become the choice online advertising platform for the 70 million businesses worldwide.
This is just the “beginning” for Facebook. Sandberg stated users are adopting the social network faster than ads are incorporated — an imbalance that needs correcting. The social network will continue pushing personalized and targeted ads in new formats and contexts.
Twitter introduced a new way for small business to advertise through the microblogging website in March. The self-serve advertising platform will be available for clients to create promoted tweets and promoted accounts.
Twitter, who partnered with American Express for the advertising initiative, opened up the platform to the first 10,000 business to sign up.
Do you think social media will see the bulk of online advertising campaigns in the future? Let us know in the comments.
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