Defying the overall economic trends witnessed across the United States and the rest of the world, Silicon Valley is once again a thriving, dominant ecosystem that some are calling “the last great American frontier.” Spurned by widespread popularity of social pillars including Facebook and Twitter, the seemingly insatiable appetite for tech IPOs and innovations in content and brand integration, the prospects for online advertising are brighter than ever before.
The IAB reported 2010 online ad revenues of $26 billion, a 15 percent increase from 2009 and a new record. While search remains a dominant revenue generator – accounting for 46 percent of total spending with 12 percent YoY growth – relatively newer formats including sponsorships, mobile formats and site takeovers are experiencing massive growth. Many entrepreneurs and venture capitalists, with big valuation dollar signs in their eyes, are literally betting their fortunes on this growth trajectory continuing, hoping advertisers follow the paths of the hundreds of millions of users interacting on Facebook and Twitter every day.
Facing looming pressure to generate new revenues off their massive engaged user bases and hoping to disprove critics who argue social media advertising is ineffective, Facebook and Twitter have accelerated their monetization programs. However, the two social icons are tackling the same issue with two very different strategies.
Facebook, which enjoys healthy, highly profitable partnerships with gaming companies like Zynga, has exploded past Yahoo! to become the largest seller of online display advertising (in the United States, excluding Yahoo! media network partner sites.) While Facebook is home to the online “Pages” of virtually all of the world’s largest brands, the company’s automated ad-buying system is targeted toward smaller advertisers, allowing them to custom-target based on a wide range of demographic and geographic variables.
Twitter, still several years behind Facebook in monetization development, is just beginning to build out its sales force and will not possess an automated ad-buying system until late 2011. Under the direction of Adam Bain, Twitter’s President of Global Revenue, the company has slowly rolled out advertising platforms including Promoted Tweets, Trends and Accounts that have been targeted exclusively toward the largest brand advertisers on the Web. As Twitter’s ad auction infrastructures develop further and the sales team grows in size, and if usage continues to skyrocket with the help of key platform integrations like Apple’s iOS 5, the company’s $150 million in projected 2010 revenues will likely swell dramatically, helping to justify the reported $8-10 billion valuation.
The two distinct strategies employed by Facebook and Twitter are likely to merge and overlap as each company builds its sales and ad-serving infrastructure, but it appears each company understands how businesses of all kinds use their services and has structured their early monetization platforms accordingly.
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