January 13, 2012, 11:29 AM

Ad spending on Facebook will nearly double this year

Efficient Frontier says Facebook accounted for 2.7% of online ad spending in Q4.

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Ads on Facebook Inc. will account for 5% of all online advertising spending this year, according to a report from Efficient Frontier, an ad-buying and optimization firm that is being acquired by Adobe Systems Inc. in a deal expected to close this quarter. That’s up from the 2.7% of ad spending on Facebook in the fourth quarter of 2010.

“Facebook continues to be where marketers are placing new bets by adding advertising spend with a focus on fan acquisition,” says David Karnstedt, Efficient Frontier president and CEO.

To attract consumers who spend time on the social network, retailers and other marketers are using a combination of Facebook’s various ad formats, which include Ads, Sponsored Stories—an ad format on the social network that enables companies to pay to highlight posts or actions that a consumer’s Facebook friend has made that relate to the advertiser—and the new Featured Stories, which highlights a connection’s actions in a consumer’s news feed. Such efforts are working, says the report, as brands increased their fan count 9% per month on average in the fourth quarter.

The vendor says marketers’ increased spending in social media advertising represents new online spending. That is, it is not eating into their search and display budgets since total online ad spending is on the rise. Overall, retailers’ search spending increased 18% in the fourth quarter compared with the same period in 2010.

Cost per clicks dipped 5% in Q4, thanks, in part, to a rise in mobile advertising, where clicks are less expensive. Mobile advertising accounted for nearly 8% of total search spend, up from 2% a year earlier.

The report suggests that mobile search spending could account for up to 22% of all paid clicks by the end of the year. “Mobile search advertising is an area of significant investment,” says Karnstedt.

The report also found that Google Inc. had an 80% share of the search market in the fourth quarter, a 2.5% jump from a year ago. However, clicks from Yahoo Inc. and Bing yielded 14% more revenue per click than Google, while also having a 9% higher return on investment than Google.

The report is based on data from Efficient Frontier’s customers.

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