Google and Facebook’s bat­tle for eye­balls, tal­ent and adver­tis­ing dol­lars prompted us to look at our own data. We looked for answers to ques­tions on everyone’s minds: (1) How does Face­book mea­sure against Google in terms of spend, CPC (cost per click) and other key met­rics? (2) What do these met­rics tell us about Facebook’s poten­tial abil­ity to grow?


 Sid's FB graph

We looked at the Face­book cam­paigns of many of our clients across sev­eral key met­rics and have sum­ma­rized our find­ings in the chart above.


In this adver­tiser set, the aver­age Face­book bud­get was 6% of the bud­get on Google, a fig­ure that, when extrap­o­lated out to Google’s entire rev­enue base, sug­gests Facebook’s rev­enue was $1.85 BN in 2010 (Google’s rev­enues was $29.32 BN in 2010).  Our extrap­o­la­tion lends cre­dence to the rumor that Facebook’s rev­enue was $2 BN last year.


CPCs on Google and Face­book are vir­tu­ally iden­ti­cal. How­ever, the CPMs tell a com­pletely dif­fer­ent story. On a CPM basis, Face­book ads cost only 5% of that on Google. Put dif­fer­ently, adver­tis­ers are able to get 37% more impres­sions on Face­book while pay­ing only 6% of their Google budgets. 

Our pre­lim­i­nary take

A side-by-side met­rics analy­sis between Google and Face­book on tra­di­tional search/display met­rics is not appro­pri­ate. Google is an excel­lent adver­tis­ing medium for reach­ing in-market con­sumers who are clearly artic­u­lat­ing their intent with their search terms.  Face­book can­not deliver the same kind of user-intent based tar­get­ing, at least not today.

Face­book does deliver some­thing Google can­not today: viral­ity.  And it is the power of the viral net­work effect that makes Face­book so pow­er­ful and valu­able.  The pri­mary means a brand has to achieve a viral effect is through con­sumers’ lik­ing their com­pany, prod­ucts, or even their ads.  The action of lik­ing a brand brings a host of very valu­able expo­sure, data, and com­mu­ni­ca­tions oppor­tu­ni­ties including:

a.     A rich data set about their cus­tomers and prospects

b.     The abil­ity to com­mu­ni­cate to con­sumers who “like” the brand via ads and reg­u­larly pub­lished news feed updates

c.     A means of trans­mit­ting a brand or prod­uct mes­sage when the on-average 140 friends are exposed in their news feed to that individual’s “like” or “share” (repeat the same action if any of these friends also like/share)

d.     An expanded adver­tis­ing tar­get set via the abil­ity to tar­get all “friends of likes” with ads

Despite the obvi­ous lim­i­ta­tions of tra­di­tional met­rics, the signs are highly encour­ag­ing for Face­book. The frac­tional CPMS and huge impres­sion vol­umes would be very attrac­tive to brand mar­keters who can reach a large audi­ence more effec­tively than ever before. Indeed, as Mary Meeker men­tioned in her Web 2.0 talk, CPMs on Face­book appear to be undervalued.

CPCs can also be argued to be under­val­ued on Face­book. While CPCs on Google and Face­book are very sim­i­lar, today it is unlikely that the met­ric cap­tures the true value of the data, tar­get­ing and viral­ity of Face­book. In a basic exam­ple, we firmly believe that the value of a like on Face­book is far above the cost of acquir­ing a like today. Due to these fac­tors, com­bined with the rel­a­tive imma­tu­rity of Face­book ad mar­kets, we believe Face­book CPCs are indeed undervalued.

We see Face­book as a medium that pro­vides enor­mous value in a way we haven’t seen before. While their reach pro­vides huge oppor­tu­ni­ties in a tra­di­tional direct response sense, the real value is in the social out­comes of a response that, in turn, pro­duce rev­enue. We antic­i­pate the mar­ket­place adopt­ing new met­rics to under­stand, ana­lyze and opti­mize to these “social ampli­fi­ca­tion” vari­ables as Face­book con­tin­ues on its path of rapid growth.

Dr. Sid­dharth Shah
Sr. Direc­tor, Busi­ness Analytics