Facebook ads grow 400pc as online ads business booms

2 Jun 2010

New research reports into advertising by ComScore and KPMG show renewed confidence and optimism for advertising and media, with online and connected devices showing the strongest avenues for growth.

Facebook, last week named by Google as the world’s number one website, said that its advertisers have more than quadrupled since the start of 2009. The company has doubled its salesforce and is capitalising on big brands like Disney choosing it as a launchpad for new movies like Toy Story 3.

Facebook had 519.1m users in April, up from 411m in April according to ComScore.

According to KPMG strong recovery in advertising markets and continued growth of mobile data services led to favourable markets and optimism for communications and media companies in the first quarter of 2010.

While overall ad market growth was encouraging for companies, results were more generally favourable for online advertising than for print publications.

Digital advertising revenue

Janet Robinson, president and CEO of the New York Times Company, said revenue declined 3pc to just under $588 million, as overall ad revenue fell 6pc and circulation revenue rose 4pc.

“Noteworthy growth in digital advertising revenue, which rose 18pc, significantly offset a 12pc decrease in print advertising revenue.”

The company said online ad revenue provided 26pc of the company’s ad revenue mix, compared with 20pc in the fourth quarter of 2009. The company attributedprint advertising declines to lower revenue from entertainment studios, as well as financial services and transportation brands.

Googlesaid revenue grew 23pc year-over-year to $6.8 billion. Company-owned sites revenue was $4.4 billion, a 20pc increase. Adsense revenue rose 24pc to $2 billion. Other revenue, including wireless handsets, was $300 million.

“We are seeing a better recovery in the domestic market. If you look at the comps from last year, the numbers look much better,” said Nikesh Arora, president of global sales operations and business development at Google. “We are seeing activity from our large advertisers, who are coming back in droves and reconfirming their faith in search advertising.”

Yahoo!said revenue of US$1.6bn represented 1pc year-over-year growth.

“The display market is coming back,” said CEO Carol Bartz. “The quality of advertisers is on the rise, and that means the quality of ads is also up. These advertisers are looking for new, creative ways to get in front of customers.”

Handset market shifts

Rising demand for data services is producing similar boosts in the popularity of smartphones and integrated devices. Strong competition is driving down the average selling prices of smartphones, especially for handsets targeted as primary Internet access and messaging devices in emerging markets.

Providers said demand for middle-tier “feature phones” is fading as the device market evolves to feature converged handsets at one end and voice-centric phones at the other.

“We see the feature phone market for the whole industry compressing in terms of both revenue and profitability,” said Motorola co-CEO SanjayJha.

Motorola reported US$5 billion in revenue. Mobile device sales were US$1.6 billion, and enterprise mobility solution sales were US$1.7 billion, up 6pcyear-over-year.

Olli-Pekka Kallasvuo, president and CEO of Nokia, said smartphone average selling prices are falling as demand increases. Device shipments rose 16pc year-over-year, while device and services net sales of €6.7 billion were up 8pc year-over-year. Revenue of €9.5 billion represented a 3 pc year-over-year increase.

Expansion in connected devices

While growth remains strong for data-enabled handsets, service providers and content firms are also optimistic about the market potential of devices such as e-readers and tablets designed for mobile content consumption.

AT&T, for instance, reported more than a million connected device subscribers, primarily using e-readers and alarm systems. The company said that while connected devices generally represent comparatively lower ARPU figures than smartphones, subscribers offer favorable profitability and churn characteristics.

News Corp. chairman Rupert Murdoch said his company was encouraged by early sales of digital content on connected devices such as Apple’s iPad tablet. Murdoch said News Corp. was collaborating with other publishers, device manufacturers, and other technology firms on standards for formatting local news content for subscription delivery on a variety of mobile devices.

Disney CEO and president Robert Iger also cited the revenue opportunities offered by mobile content.

“The creation of exciting new devices like the iPad, the growth of social media platforms, and the choice demanded by consumers in how and when they enjoy their entertainment offers incredible opportunities,” Iger said.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years