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Twitter and Facebook Seek Big Ad Dollars with Opposing Strategies

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.

IAB - Online Ad Spend Classification

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.

Adam Bain - Twitter President of Global Revenue

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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As Bing Sees Big Gains, Is Microsoft Cool Again?

Under the tutelage of Bill Gates, Microsoft exploded into one of the world’s largest and most valuable companies, generating billions of dollars in profits annually for shareholders. The dot-com boom made many employees and investors millionaires, and the company appeared unstoppable.

As the company matured, growth stabilized and new tech darlings like Google stole the spotlight. Delayed product launches of centerpiece operating systems, failed products and advertising campaigns, broken acquisition deals and an apparent lack of internal innovation gave Microsoft a reputation as a “has been” that had passed its prime, and current CEO Steve Ballmer lost the confidence of many investors.

Bill Gates and Jerry Seinfeld Microsoft Ad

However, new data is showing that Microsoft may be experiencing a reversal of fortunes, as the company’s investments in search are beginning to pay off. The brutally competitive search engine market has had one dominant player for the last decade – Google – which has held as much as 80 percent of the United States search market.

In October 2010, the U.S. search marketshare breakdown was as follows: Google (72.15%); Yahoo + Bing (23.64%). The most recent Hitwise data shows Bing has made substantial gains at the expense of Google and Yahoo. Bing-powered search now controls 30.01% of the U.S. search market, while Google’s share has fallen to 64.42%. (See below: Image courtesy of Mashable.)

Bing vs. Google

These gains may be the result of a major multi-platform ad push by Microsoft for Bing, but the trend is a positive sign for investors and spectators that have remained loyal to the company.

Strong performance in search, high expectations for tablet and PC versions of the upcoming Windows 8 platform, new developer confidence in the Windows Phone platform following the recent Nokia partnership announcement, the smashing success of Kinect and Xbox 360 and widespread adoption of Microsoft’s iPhone and iPad apps are powerful indicators of a possible Microsoft mindshare and marketshare resurgence.

Bing iPad App

Less than a decade after Wall Street and Silicon Valley critics alike pronounced the death of Apple as a legitimate player in the lucrative personal computer market, the world has witnessed the resurgence of the Cupertino-based company as the dominant force in the rapidly-growing world of consumer electronics. Could we be seeing the beginning of an Apple-esque Microsoft turnaround? Critics will call it wishful thinking, but with Google in the process of a massive leadership change, Yahoo! undergoing a drawn-out transition phase and the tenure of Apple CEO Steve Jobs uncertain, the competitive landscape is changing and Microsoft has substantial opportunities in search, PCs and mobile.