Oh, This is Why Facebook is so Expensive. Well Duh!

facebook money

By Jason Kelley
May 24, 2010

Media Consuption

Due to 50% of all advertisers using social networks- such as Facebook- as a part of their marketing mix, a significant and classic inelastic supply/demand scenario is being played out. Furthermore, according to a new Utica study, the pace of advertisers turning to social networks to reach their core consumer will grow to nearly 70% by the end of 2010.


More North American marketers use social media
As many of Ootem’s clients have seen, there is even greater competition in the US and Canada compared to other global markets. This internal finding is supported by the data:


Brands use multiple social networking marketing tactics to engage their consumer
Adoption of social media by marketers is strong across all tactics. The lowest-rated tactic, syndicated content, still has a net 53% expected usage rate. Not surprisingly, third-party social networking sites such as Facebook (82%) and blogs (70%) have the highest net expected usage rates. Microblogging sites, such as Twitter, also have a 70% net expected usage rate. This net includes a higher percentage of planned future usage than the net for blogs, reflecting on the relative newness of Twitter and similar microblogging sites.


The hockey stick went up in 2009 for Twitter and Facebook
According to ComScore both Twitter and Facebook consumer growth was well into the triple digits. In May of 2009, Facebook surged to the number one position among social networks for the first time -overtaking MySpace. Facebook continued its strong growth trajectory throughout the year, finishing with 112 million visitors in December 2009, up 105% from about 55 million visitors during 2008. Twitter finished the year with nearly 20 million visitors to its website, up 900% from just 2 million visitors in 2008. Much of Twitter’s extraordinary audience growth occurred during the first few months of 2009, at one point jumping from 4 million visitors to 17 million visitors between February and April.

The main action item is this: far gone are the days of a simple linear social networking play. Consumer growth + Advertiser growth=higher cost of entry. To counter balance pricing pressure, brands should adopt a multifaceted approach in order to achieve the yields of early 2009.