Facebook is a dominant presence on the internet and around the world, but that dominance may be much greater than nearly anyone could imagine.
Traffic to the huge social network, with 500 million users worldwide, now accounts for nearly 25% of all internet pages viewed in the United States. According to online research firm Hitwise,
The amount of content consumption taking place on the popular social network has also grown substantially where nearly 1 in 4 page views in the US took place on Facebook.com for the week ending November 13, 2010
The market share of page views for Facebook.com was 24.27% last week, 3.8x the volume of the 2nd ranked website YouTube.com with 6.93%. More than one of ten internet visits are to Facebook which demonstrates the huge number of pages viewed by each visitor. The numbers do not include mobile traffic.
Recent data from Morgan Stanley and other sources show that Facebook gets an advertising CPM of about $.60 compared to internet portals like Yahoo! (NASDAQ: YHOO) which charge closer to $2.50. Smaller, more vertical sites can command CPMs from $5 to nearly $10, but these sites are only a modest portion of internet traffic.
The effect of Facebook’s growth in page view dominance is that it represents a larger and larger platform for online marketers. Facebook has developed relatively sophisticated means to target its users for advertisers. This has cause privacy groups and Facebook members to protest use of that data, but the information allows the social network site to build more value for its advertising customers.
Facebook’s ability to target audience segments and charge low CPMs is bound to put pressure on portals in terms of what they can charge for advertising, if has not already done so. Facebook makes the case that it can reach the same people that portals do with an equivalent ability to provide demographic targeting as Yahoo! and its peers can, and do so at a much lower price. This is almost certain to siphon some amount of revenue from the older sites.
Facebook’s price and target abilities could do more to bring down online CPM prices than the recession did.
Douglas A. McIntyre