Facebook grabs bigger slice of display ad pie

SAN FRANCISCO (Reuters) - Facebook, the world’s No. 1 Internet social network, is proving as popular among advertisers as it is among Web surfers.

Nearly one of every four graphical, online display ads viewed in the United States in the third quarter was on Facebook’s website, according to a new report by Web analytics firm comScore.

Facebook’s 23.1 percent share of display ad impressions was up sharply from 17.7 percent in the second quarter and more than double the No. 2 ranked company, Yahoo Inc, which had 11 percent share.

In fact, Facebook’s website racked-up more ad impressions in the third quarter than the next four companies combined, which includes Yahoo, Microsoft Corp, News Corp’s Fox Interactive Media and Google Inc, according to comScore.

Analysts note that Facebook ads sell at a significant discount to display ads sold on traditional Web portals such as Yahoo. According to Evercore Partners analyst Ken Sena’s estimates, the effective CPM (cost per thousand impressions) for Facebook’s U.S. display ads is roughly $1, compared with the $3 CPM for display ads on Yahoo’s family of websites in the United States.

But Sena notes that Facebook’s ad rates are on the rise, as marketers make increasing use of the ability to target ads to Facebook users based on their interests and other information.

“It certainly is an issue for the portal sites,” he said.

“While you still have the sort of traditional display players benefiting from strong growth trends in display (advertising), social is probably taking a disproportionate share of that growth.”

The U.S. online display ad market is expected to grow roughly 13 percent to $8.56 billion in 2010, according to eMarketer, a digital market research firm. Yahoo is expected to remain the No. 1 seller of display ads by revenue this year, with 15.4 percent share of the market, according to eMarketer, with Facebook in second place with a 9.5 percent share.

Privately held Facebook, which counts more than 500 million users, does not disclose its financial results. Two people familiar with the matter told Reuters in June that the company generated up to $800 million in revenue in 2009.

Facebook delivered 297 billion impressions of display ads in the United States in the third quarter, according to comScore. The comScore data includes various types of graphical Web ads, but does not include video ads.

ComScore’s Andrew Lipsman said that Facebook’s increasing share of the display ad market probably resulted from the company’s fast-growing audience size, an increase in the number of ads per page that Facebook delivers and an increase in the amount of time that users spend on its website.

According to comScore, users spent an average of five hours per month on Facebook during the third quarter, compared with three hours per month in the third quarter of 2009.

“The more people in your social network that are online, the more value it creates to you as a user, the more you are likely to engage and contribute,” said comScore’s Lipsman.

Editing by Steve Orlofsky and Andre Grenon