Facebook sells about $1 billion of advertising every quarter and it’s still growing, putting it on course to sell perhaps $5 billion or more in ads in 2012.But what are the limits to its growth?
TBG Digital CEO Simon Mansell decided to try and figure it out based on Facebook’s current numbers. (TBG sells and manages Facebook advertising.)
Once he’d finished figuratively scrawling on the back of an envelope, he found that Facebook’s current ad inventory could top out at $10 billion a year.
The data assumes that Facebook completely sells out its entire inventory of ad space—which it never has. It also assumes Facebook won’t increase the number of ad slots per page (which it is doing). It assumes CPMs (cost per thousand users) won’t go up, which they well might. It ignores mobile advertising, which Facebook doesn’t currently do but will begin imminently. And it assumes that there is no growth in users, which there obviously will be.
That said, here’s how Mansell calculated the number:
- Facebook says it serves 798 pages per person, per month.
- Assume 20 per cent of these pages are on the homepage and 80 per cent are on the rest of the site (marketplace inventory).
- 160 pages on homepage x 1 ad = 160 impressions per person per month on the homepage
- Multiply that by 850 million users = 136,000,000,000 homepage impressions
- Multiply that by a $2.50 CPM (“cost per thousand impressions”) = $340,000,000 / month. (CPM in the U.S. is more like $4. But global pricing would bring this down, hence an assumed $2.50.)
- 638 pages on the rest of the site x 4 ads = 2,552 impressions per person, per month via marketplace.
- Some pages have more than four ads but some have fewer, so assume four is the average.
- Multiply that by 850 million users = 2,169,200,000,000 marketplace impressions
- Multiply that by a $0.22 CPM = $477,224,000.
- (CPM of $0.22 average taken from the TBG Digital Q4 Data report – based on a sample size of more than 300 billion impressions in 205 countries.)
- $340 million plus $477.2 million = $817 million per month.
- Total ad revenue: $9.8 billion per year.
Let’s just call that $10 billion!
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