An entrepreneur and I were talking about startup opportunities in the social advertising space. We ended up wondering about market size, which is an impossible question to answer on Net scale so instead we talked about Facebook’s SocialAds network. We made a guess that if it works it can be a greater than $100M revenue opportunity. I did some checking. It turns out we could be right.Here is a summary report from the data kitchen.SocialAds impressions are restricted per user on a daily basis. So you need an estimate of the number of unique users per day. Not easy to get. ValleyWag got the FB rate card from June. There the numbers are 27M registered users 54% of which return every day. comScore data puts current monthly uniques at over $30M though, which gives a guess of about 16.5M uniques/day.There is some uncertainty in how SocialAd impressions are restricted but the most conservative reading is a cap of two impressions/user/day.Next comes guessing the CPM. According to ValleyWag and the FB rate card deck they got, untargeted sponsored homepage stories have $10 CPM. SocialAds are targeted and recommended. Also, their supply is artificially restricted, which will likely push CPMs up. On the other hand, newsfeed content is engaging and there is an inverse relationship between how engaging an area is and clickthroughs from that area. So, let’s stick with $10 CPM.Doing some basic multiplication yields a potential revenue opportunity of about $120M.Now, before you start laughing at this swag, let me remind you that I sit on the opposite side of the table listening to these types of market analyses all week long. At some point, the desire to try one becomes irresistible. 😉
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“…and there is an inverse relationship between how engaging an area is and clickthroughs from that area.”
If this is true… the question then would be – which kind of ad based business models are better suited for the web – those seeking “deeper” user engagement or those with “lighter” user involvement?
Or, in other words – which kind of user attention/behavior is more valuable for an ad based web business – the strongly focused, motivated, and perhaps goal driven… or the exploratory, “fleeting,” fragmented, occasional, opportunistic one…?
“…and there is an inverse relationship between how engaging an area is and clickthroughs from that area.”
If this is true… the question then would be – which kind of ad based business models are better suited for the web – those seeking “deeper” user engagement or those with “lighter” user involvement?
Or, in other words – which kind of user attention/behavior is more valuable for an ad based web business – the strongly focused, motivated, and perhaps goal driven… or the exploratory, “fleeting,” fragmented, occasional, opportunistic one…?
Emil, the answer is that it doesn’t matter in the end. Revenue = f(traffic, effective CPM). If you have engaging content you may have lower clickthroughs (leading to a lower eCPM) but you may have a ton of traffic. Vice versa, a site like TechTarget doesn’t have huge traffic but because of its tightly focused audience + content it has fantastically high eCPM.
Take a look at this article I posted about a month ago.
http://blog.deftlabs.com/2007/10/what-is-facebook-social-application.html
Ryan, interesting analysis–thanks for sharing.
I like AppHound.