Facebook's Direct Pivot Will Fuel 56% Revenue Increase

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Its new emphasis on direct response campaigns will pay off immediately, predicts eMarketer, while its value as a medium for social engagement will diminish.

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Facebook will grow ad revenues by more than 56% this year to nearly $11 billion and give the social network a two-point bump in share of digital ad spending, to 7.8%, according to an analysis released by eMarketer.

Fueling this surge, says eMarketer, is Facebook's recent strategic shift to serve as a platform for direct response advertising rather than as a medium for brands to drive social interaction and consumer engagement. The majority of Facebook's most recent ad initiatives are aimed at marketers with performance goals, the researcher reports.

“Companies still see Facebook as a platform for social brand interactions, but that's no longer the way Facebook is presenting itself,” says Debra Aho Williamson, principal analyst of social media at eMarketer. “Facebook has moved on, but many brands are still marketing the same way they did two years ago.”

In the past five years U.S. advertisers have upped direct efforts at a compound annual rate of 16%, according to eMarketer's “2014 Digital Ad Spending Benchmarks” report issued last month. Over that time, marketers increased spending on direct response campaigns by $4.74 billion as compared to a $2.79 billion rise in brand campaigns. Nearly 60% of ad budgets are now devoted to direct methods, led by retailers (70%), financial services (62%), and automotive (60%).

Despite the sizeable one-year boom it envisions for Facebook, eMarketer is more conservative as to how soon marketers will master its capabilities for direct marketing. “There will be a learning curve,” Williamson says. “Facebook's targeting is getting very sophisticated and advertisers can segment audiences into smaller and smaller buckets, but many brand advertisers are more accustomed to buying ads aimed at mass audiences.”


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