Citi Analysts: Facebook Ads Are Taking Spending Away From Display, Not Search

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Back in May, we reported that Facebook now accounts for one out of three ad impressions in the U.S., and that, really, no other web property in the U.S. comes close (Yahoo was second with 10 percent). That means that Facebook served approximately 340 billion ads in the first quarter. It’s probably not a surprise, then, that advertising makes up for about 89 percent of the social network’s total revenues, which are estimated at about $1.6 billion for the first six months of 2011.

Today, on Citi’s third quarter search marketing trends call, the panelists discussed the current landscape of search advertising, among other things that Google is maintaining its dominant market share in advertising spend on search, at 80 to 81 percent of total spend. While the panelists said that they’re not seeing much demand for social search ad targeting, there is obviously a ton of interest in marketing on Facebook.

Much of this is due to the appeal, as Facebook’s Ad Czar Gokul Rajaram said at TechCrunch Disrupt earlier this month, of the social network’s ability to offer a social discovery experience through its ads. Rajaram clarified this point by saying that brand messaging tied to social context (“likes”, for example) leads to 68 percent ad recall — something that’s obviously of great interest to advertisers.

Going forward, social ads or pages with sponsored stories or status updates will be the “foundation” of the network’s ads, the Facebook Ad Guru said. Yet, Citi panelists noted that the amount spent on Facebook ads is currently only 5 percent of what is spent on search ads. This number is expected to increase dramatically in the future, but what is of interest is that the panelists nearly unanimously agreed that Facebook ad spend is currently gobbling up share from traditional ad buckets, like banner, display, and brand awareness, and not from direct response and search.

Traditionally, the media has made a big deal out of Facebook’s threat to Google in search advertising, but as it stands now, that doesn’t really seem to be the case. What is for sure, however, is that Facebook and Google continue to gobble up online display advertising from the likes of Yahoo and Aol, and Facebook is, by all accounts, growing like gangbusters in this area.

We’ll continue to watch with interest as Google+ matures and certainly the two Internet giants will continue to push back and forth, but for now it seems safe to say that search marketers can continue to maintain their focus on Google, and brand marketers can keep trying to figure out how to socialize with customers on Facebook.

Excerpt image courtesy of Billboardom