Want Premium Advertising on Facebook? Bidding Starts at $710,000

The biggest knock against Web 2.0 and internet companies has always been a lack of revenue-generation ability.  Critics would often say statements like… “What is the point of having a great platform if you can’t generate any revenue from it?”

This trend was true with Amazon.com in their early days, or MySpace, and most recently Twitter.  Although these sites captured the attention of consumers and grew at a rapid clip, they ran into road blocks when it came down to monetizing their platform.

Even though these sites displayed impressive traffic and user-engagement numbers, generating revenue from their platforms was always a real struggle.  Facebook, arguably the most dominant Web 2.0 company of this era, has no such problem.

The company developed a tight-knit (and very profitable) relationship with game-developer Zynga ($ZNGA), but now they’re ready to take it one step further by aggressively growing their advertising revenues.

As they gear up for their upcoming $100B initial public offering, Facebook continues to earn mega bucks by selling premium advertising spots to marketers.  Their most recent foray is entirely new “log out pages”, which are full-featured advertisements and some of the most grandiose advertising real estate that Facebook has ever rolled out.

An example "log out" page that features an advertisement for Titanic

According to a report from Ad Age digital, Facebook is reportedly seeking $710,000 per day for this prime advertising space.

At this stage, it’s not entirely clear whether these advertising spots will be a big hit with marketers, but you must applaud Facebook for their risk-taking approach.

Given the wide range of rich demographic information available for their 750 million users, one could argue that Facebook is the ideal platform for marketers to reach consumers.

The company has built an amazing platform and now they’re starting to aggressively monetize it by offering a variety of different advertising packages.  Unlike many silicon valley companies who are still trying to figure out their long-term business model, Facebook is already generating a significant amount of revenue by leveraging their advertising network.

With Facebook’s widespread popularity and record-setting user engagement, it wouldn’t surprise me to see these “premium” advertising packages take off.  So far, companies like Microsoft and Subway have jumped on this opportunity and I think more companies will follow suit.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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