Here's a new Facebook revenue estimate to think about: $90 million a year — from sponsorships alone. Sure, I've poked fun at Facebook's fanciful figures. The social network's board members, after all, can't get their stories straight on how much the company is making — so why should we trust their wild-eyed, multibillion-dollar valuations for the company, either? But now it gets real, folks. An informant has forwarded me a Facebook rate card — a rate card the company claims doesn't exist. It's dated February, so keep that in mind. And any rate card, of course, is a salesman's fantasy numbers, not the real ones that get hammered out in a sharp-elbowed deal. But the contents of the card square with what I've heard from insiders. After the jump, what it takes to buy your way onto Facebook.
At first, Facebook spokesperson Brandee Barker says, "We don't have a rate card." When I informed her that the document I had was labeled "Rate Card / Snapshot of Integrated Opportunities," she backtracked and said, "I just don't think it's a rate card in the traditional sense." Of course. Only in the sense that it lists advertising rates.
Even Facebook admits its banner ads aren't particularly effective. The "Homepage Sponsored Story" gets a click-through rate "10-20x higher than banners." That would put it at a respectable range of 0.4 to 0.8 percent.
Those sponsored stories will cost you, though, at a CPM, or cost per thousand, of $10, and a minimum spend of $50,000. Targeting costs $2 to $5 extra in CPM.
The rate card says that sponsored groups require a $150,000 expenditure for three months. Annualize that and you've got a run rate of $90 million a year — but that, of course, doesn't account for any discounts or package deals.
Victoria's Secret and Dave Matthews Band are listed as sponsored groups here, in this February-dated rate card, and still have active groups. That means that they've been spending steadily on Facebook for at least five months.
Apple, eBay, MTV, and Red Bull are just some of Facebook's sponsors.
So what to conclude from this? Banner ads, clearly, don't count for much on Facebook; even Facebook admits as much to advertisers, which is why the company has pawned off its banner-ad inventory to Microsoft. (Microsoft, like a sucker, took the deal, which goes to the credit of Facebook's shark-like dealmarkers.)
The real advertising money is in sponsorships. Valley insiders knew that all along; they just didn't know how much until now. Do the math, and at Facebook's current sponsor count, just the $150,000 minimum spend could reach $90 million a year.
The main question, though, is how much its sponsorship business can grow without offending users. Only one sponsored story can show up at a time on a user's homepage, which limits inventory. And with Facebook apps now vying for users' attention, will sponsored groups still spread as quickly from user to user?
Sheer novelty, too, may account for the sponsored stories' high click-through rates. Online banner ads had high click-throughs in the mid-'90s when they were first introduced; then Web surfers wearied of them. Who's to say the same thing won't happen to ads in Facebook's newsfeed?
I say all that as a caution to starry-eyed Facebook evangelists, of course. Facebook would be foolish not to exploit its users as long as it can. But counting on a high click-through rate forever would be equally foolish. And pushing its sponsorship business more Facebook is doing today could just hasten that rate's decline.