New Facebook Monetization Hype

Seems this latest release about projected earnings for facebook shows just how out of touch many execs are about how well a social network can be monitized.

Click thru rates for social networks  are around 0.05% ( half of 1 percent),  this is because they have really high pageviews per user ratio.  If click thru rates were to rise  pageviews per user would decline sharply as the 2 are related.  The monetization of facebooks inventory is currently around 17 cents a CPM and is projected to rise to $3.78 a cpm BY 2015.

With a click thru ratio of around .05 that means that for every 2 CPM’s you get you get 1 click.    Current monetization on facebook would be34 cents a click according to that yahoo chart.    I think nearly everyone in the affiliate and marketing would laugh at the idea of paying $7.56 a click on facebook in the year 2015.    Most of internet advertising today is based on direct marketing, and there is no one out there that can monetize all of a social neworks inventory at over 60 cents/click.

People who think that they can monetize social networking widgets at a $10/CPM  or anything above 50 cents/cpm will be in for a shock.   If social networks currently can’t monetize at higher then 17 cents a CPM then what makes them think they can ?

The only way that facebook could generate that much money is if they got branded ads for the site.  But given that myspace, facebook, bebo, youtube and every other major site under the sun now wants branded advertisers that market is going to collaspe.   The same thing happened to adsense.  Before the social networks started using adsense the CPM’s were really high and since then they have steadily collapsed as they just have to much inventory.

I just can’t see this fantasy turning into reality,  like many other major site owners if I started getting paid $7.56 a click  my sites valuation would be in the billions. 

40 Responses to “New Facebook Monetization Hype”

  1. Mayo Says:

    >I just can’t see this fantasy turning into reality, like many other major site >owners if I started getting paid $7.56 a click my sites valuation would be in >the billions.

    If that would happen bubble v2.0 would be knocking at the door, but hey this is not immobilities market where you have to invest 3 to 5 years to build a high-rise complex, as you said YouTube, Bebo, MySpace et. al. are popping up every day like mushrooms — it’s a diminishing returns market, and if you think that with 15 BN page views a month your gonna get more than 2.5MM$US a month in CPM it’s a pure fantasy, thats why i think facebook owners are fools for not selling on 1.5 to 2.0 BN$US – but i think that the bigger fools are the buyers who think they can make more money than they invested in (500MM to 1BN in cash – only a fool would accept to get paid in shares, no matter if they were even from Google…)

    The way to make money on these markets if YOU as a buyer has A PRODUCT TO SELL, AND MAKING FAT MARGINS ON THAT PRODUCT, say like Fox media where they can fork DVD’s, TV shows et.al to MySpace viewers and make a fat margin on that product…. all else is flawed, one minor financial shakedown and you have fleeing publishers, then from what are you gonna live from, from IPO’s ????

  2. jack mardack Says:

    You’re absolutely right, Markus. About the only thing that could make those projections plausible is the sudden entry of massive impression demand from “branding advertisers” with absolutely no concern for converting or even acquiring traffic. If they don’t have to click to satisfy the advertiser, they don’t have to leave the site, and pageviews don’t have to decline.

    Jack

  3. Stephen Sclafani Says:

    You really shouldn’t take those numbers seriously. It usually is the case in these situations that the numbers are made up to justify a deal. Facebook wont even exist in its current form in 2015 let alone be making those numbers.

  4. Andrew Johnson Says:

    B2B Magazine publishes a list of the top ad buyers in the United States. Guess whose at the top — the US auto makers who are not doing so hot. Branding money is very dependent on the overall economy.

    Here is another big problem: the most effective internet advertising models tend to be pretty intrusive. Intrusive advertising opens the competition’s gates wide open.

    Unlike television (e.g. MTV) barrier to entry isn’t very high. Am I the only one that would be suprised if Myspace of Facebook was still at the top in 2015? Speaking to the core demographic of college users and young adults, cracks are already forming in both.

  5. JT Says:

    FYI Markus, our average annual CPM has risen over the past 3 years by nearly $10. The larger inventory hasn’t hurt us at all. Quite the opposite, there’s more advertisers fighting for our higher paying areas.

    But I could definitely see the CPM’s going down on “general” sites with the added inventories. Makes perfect sense.

    And eventually the majority of TV and radio ad money will end up on the internet. So who knows what that will ultimately do for CPM’s… but I agree if nothing else, there’s no logical way the current AdSense system will generate those kind of CPM’s by 2015.

    Possibly, if they go w/ branding campaigns and demographic vs keyword targetting. Still, I think that will be an increasingly arachaic form of advertising and branding.

    I think you’ll see branding happening more and more “off-site” – as in, ad campaigns will advertise a game or contest, cheaply, to draw people in, and THEN the real branding will happen.

    So in that case, yes, its harder and harder to imagine those kind of CPM’s en masse.

  6. Markus Says:

    JT I can see $10 CPM’s for smaller sites because the pageviews per user are so small, but not social networking.

    Lets say facebook has 40 pageviews per user per session. Assuming 100% ctr PER unique user that will give you a max possible CTR of 2.5% ie Unique users / Pageviews

    Facebooks .5% CTR stat you see in adwords represents 20% ctr in terms of facebook’s unique users. I can’t see facebook getting $ 30/click for their premium stuff and $8.00/click for the rest of it. I can see their CPM’s going up to 40 cents or so but beyond that is a stretch. The end result is that yahoo is going to take a major hit. They currently own the branded advertising market.

  7. Theron Says:

    Just curious, where did your metrics come from and what sources are you citing?

  8. Markus Says:

    My own experience with my site.

    Adwords, that of advertisers etc. I know most sites stats and earnings per CPM etc because I get pitched by so many companies.

  9. Nika Says:

    Markus,

    When you refer to CPM of 17 cents for facebook do you mean facebook on average earns 17 cents per 1000 page views or that it charges advertisers 17 cents for 1000 page views? What I mean is, if a company wants to put its ad on myspace or facebook site would they have to pay only an average 17 or 10 cents per 1000 page views? I though it was more like an average of 7-10$.

    If you consider that facebook had around 10 bn page views in November and a sell through rare of let’s say 5% and CPM (what it charges) of 7$ then: FB would only be able to sell 500 mil pages @ 7$ per 1000 pages would mean a revenue of 3,5 million. Which translated into revenue of 35 cents per 1000 total pages viewed in November. This is more in line with your 17 cents CPM.

    Could you please clarify your definition of CPM.

  10. Mike Says:

    I read in New Yorker Article 15/05/06 that MySpace CPM is only 10 cents. It seems very low. Does any one else have other figures?

  11. Sramana Mitra on Strategy Says:

    Online Focus Groups

    Robert Young writes a very pertinent piece: For Social Networks, 2007 is all about MONEY.

    College Kids, a very important demographic within the social networking phenomenon, could, however, be effectively monetized and advertising dollars from Coke, P…

  12. Lymabean » Blog Archive » Media Measurement and Modeling l Part Two Says:

    [...] Facebooks .5% CTR stat you see in adwords represents 20% ctr in terms of Facebook’s unique users. I can’t see Facebook getting $ 30/click for their premium stuff and $8.00/click for the rest of it. I can see their CPM’s going up to 40 cents or so but beyond that is a stretch. The end result is that yahoo is going to take a major hit. They currently own the branded advertising market. See full article [...]

  13. studiVZ auf Platz 1 der IVW-Auswertung « readbox blog Says:

    [...] Shift“, der in den Kommentaren des Original-Artikels aufgeführt wird und sich mit der Monetarisierung von Klicks in Web-2.0 Angeboten am Beispiel von Facebook beschäftigt. Posted by t-readbox Filed in [...]

  14. Jens Kunath - Internet, web 2.0, Business-Angel, Social Networks, Venture Capital » Blog Archive » 2.594.074.988 PageImpressions Says:

    [...] Markus Frind habe ich dazu einen sehr guten Beitrag entdeckt, der einige aktuelle Zahlen zu Facebook [...]

  15. Blog von Stefan Berge » Blog Archive » Zahlen, Zahlen, Zahlen Says:

    [...] nur die Ratios, sondern vor allem was unterm Strich zu erwarten ist. Zusammen mit den Zahlen von Markus Friend habe ich deswegen mal ein kleines Rechenbeispiel [...]

  16. Freeweb24.de Says:

    Thanks for your good article. If the big communities can sell the inventory via pay per view for 0,25 – 0,50 US-Cent for 1000 Impressions, it would be great for them …

  17. Further Facebook Monetization Problems at Oliver Thylmann’s Thoughts Says:

    [...] in the last month. Let’s presume they have all available inventory sold. Judging by this post they would make $2.6 Million a month, so $30 Million a year, meaning $8 Billion is a price to sales [...]

  18. More Facebook Monetization drama « The Paradigm Shift Says:

    [...] all the posts on facebooks CTR problem it looks like people are coming to the same conclusion I came to 8 months ago.  That being that  given Facebooks extremely LOW ctr they have no way of [...]

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  20. Can B2B Media make money from a grown-up Social Networking “sandbox” « please mr editor…. Says:

    [...] # 2. CPM rates and click-throughs are low. This is OK if you have 30 million users (Facebook) but not if you have a controlled circulation [...]

  21. » Free Advertising with Myspace & Facebook (without being a spammer) - Web Publishing Blog Says:

    [...] at first. Their closed system means there is no graphics & layouts after market. Rumors of a non-converting audience made things look even worse. But Facebook isn’t just a bunch of bored college freshmen. The [...]

  22. Dennis Yu Says:

    Few folks are getting more than 15 cent eCPM’s on Facebook and MySpace. You can get double or triple that if you are reselling clicks to other apps– but ultimately, at the end of that chain, someone has to buy something. Question is, what?

    For now, publishers make money on misleading ringtone and toolbar download offers. Beyond that, clothing, mortgage, insurance, dating, you name it— it doesn’t convert. When someone has something that works, send me a message. If you have greater than $1 eCPM, let’s talk.

    There is a lot of hype around what can be done with influence and what your friends are interested in– that is the pot of gold at the end of the direct marketing rainbow. There is no guarantee that ad networks, or even Facebook themselves, will solve this problem.

  23. Facebook Valuation at FishTrain Says:

    [...] Now, let’s play with the numbers and come up with some rough estimates. Markus Frind, CEO of PlentyOfFish, gives some Facebook numbers: [...]

  24. Jeff Herstwood Says:

    I am simply surprised! I will take into account. Thanks for the author!

  25. Ralph M. Says:

    Basic economics teaches us that the rise of supply sinks the price. However if the product is unique (in this case let say enterntaining facebook application) the demand shifts towards it and the price can rise significantly above the average. It all depends on the attractiveness of the widget and how smooth are placed ads across the flow of usage.

  26. Jesse Says:

    MATH IS WRONG IN ORIGINAL

    for one thing .05 is not half a percent
    .005 is …
    or .5 could also be half a percent

    when your numbers are wrong so are your calculations and then your whole argument doesn’t make sense.

    Nobody prob cares now, Maybe someone already brought it up just skimmed the posts

  27. The Magic of Facebook Ads » Ready Fire Aim Says:

    [...] – this is incredibly low as far as online advertising goes – a problem for Facebook that has been mentioned before as one of their biggest [...]

  28. Erik Says:

    Jesse is right, I guess either the author put it wrongly, it suppose be 0.5 and not 0.05, for 0.5 every 2 CPM get 1 click, but if 0.05 every 20 CPM get 1 click which is huge difference.

  29. La nouvelle interface Facebook: un défi pour les développeurs d'applications | The Countme.in blog Says:

    [...] a toujours eu un problème de monetisation de son gigantesque stock de pages vues, c’est à dire que son revenu par page visitée est [...]

  30. Anders Midtgaard Says:

    Good article, thx it is very difficult to do these estimates.
    I looking forward that you are underestimating the earning potentiel of facebook.
    Facebook have not yet even started to think about ways in which they can really monetize on their site. But the avenues are many, we are not talking dumb banner ads here. Facebook has more data about people’s interests than does Google or Microsoft. They know what my favorite music, movies and books are, when they truely start to provide targeted ads we are gonna see a revolution. Zuckerberg has declared he is only interested in growing the user base over the next three years then there will be a change in focus towards monetization.

  31. annoncer Kiglinga Says:

    Impossible to predict future CPM of Facebook to many unknown factors.

  32. Axel Says:

    Numbers are wrong. 0.5% CTR leads to 5 clicks per thousand: 1000 x 0.005. $0.17 per CPM means $0.034 per click, which is too low, it should be ~$1 CPM.

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  36. The Magic of Facebook Ads | The Apple Tech Blog Says:

    [...] is incredibly low as far as online advertising goes – a problem for Facebook that has been mentioned before as one of their biggest [...]

  37. WebReviewer Says:

    I am just wondering, is the CTR for social networks 0.05% or half of one percent, which is 0.5%?

  38. Shawn Sears Says:

    Yep, agreed

  39. International Internships Says:

    Having read this I believed it was very enlightening. I appreciate you finding the time and energy to put this information together.
    I once again find myself spending way too much time both reading and commenting.
    But so what, it was still worth it!

  40. The Magic of Facebook Ads - Rebel CEO Says:

    […] is incredibly low as far as online advertising goes – a problem for Facebook that has been mentioned before as one of their biggest […]

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