According to new estimates from eMarketer, Facebook’s advertising revenue was $1.86 billion last year — nearly double the estimated revenue of $740 million in 2009. That’s an impressive growth rate (86%), but not as impressive as Google’s growth in its pre-IPO days.
When Google opened its books in 2004 before its IPO, investors learned that the company had grown revenues more than 400% between 2001 and 2002, and 234% in 2003.
Google also showed that its costs and operating income (income from operations) were staying in line with revenue, which suggested to investors that the company would be able to scale very well. That turns out to be exactly what happened — in fact, operating income rose from about 20% of revenue pre-IPO to about 30% of revenue afterward.
Facebook’s profitability is unknown except to insiders and private investors.
Facebook resembles the pre-IPO Google in some other ways. The majority (65%) of Facebook’s ad revenue is coming from the US, leaving it plenty of room to grow internationally. Most of it is also coming from smaller businesses rather than big brand advertisers. And Facebook is projected to take an increasing share of overall Internet advertising dollars from Google and others — just as Google took ad bucks from Yahoo, AOL, and MSN back in its early days.
Projections are just that — educated guesses — but if Facebook’s share of US Internet advertising revenue goes from 4.7% in 2010 to 7.7% in 2011 as eMarketer thinks it will, that’s reason for Google to worry.
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