June 19, 2013, 12:25 PM

Facebook makes a pittance from placing ads on other sites

An analyst says such ads could eventually pay off, though.

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Facebook Inc. generated less than $3 million when it tested placing ads on other web sites and mobile apps last year, the social network reported in a recent U.S. Securities and Exchange Commission filing. The social network did not include that revenue in its fourth quarter earnings filing.

The filing notes that if the revenue from the ads the company displays on others’ web sites “becomes material to its financial performance” it will include that information in its quarterly filings.

Facebook last July began a test in which it delivered ads to consumers logged on to the social network on social gaming provider Zynga Inc.’s web site. Those ads show a user which of his friends have interacted with a brand or game. The social network then began what it called a “small test” last September of a service that places mobile ads in applications outside of Facebook. Those ads, which point shoppers to a mobile web site or to download an app, use the same targeting as ads on Facebook.com. 

While the filing shows Facebook has yet to figure out the right formula for placing ads outside its social network, there remains a huge opportunity there for the social network, says Nate Elliott, vice president, principal analyst at Forrester Research Inc. “The filing proves that Facebook is completely missing its most important potential revenue stream,” he says. “After all, Google made more money running ads just on third-party sites last year than Facebook made in total advertising revenue.”

Google generated $12.46 billion in revenue from running ads on third-party sites last year, while Facebook’s total revenue totaled $5.09 billion in 2012.

Facebook has a chance to earn significant revenue from using the information it knows about its users to place ads, says Elliot. “Facebook could power more effective ads everywhere from third-party web sites to TV and magazines,” he says.

However, Facebook’s lack of action on that front hasn’t stopped it from attracting hordes of advertisers on Facebook.com.

The social network yesterday announced that for the first time it has topped 1 million active advertisers. Those marketers’ ads, Facebook says, are helping businesses develop connections with consumers. For instance, roughly 70% of U.S. and Canadian Facebook users who have logged on to the social network in the past month Like at least one local business on Facebook. And in an average week, there are over 645 million views of, and 13 million comments on, local businesses’ Facebook pages.



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