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Emarketer reduces Facebook’s 2012 revenue estimate by $1bn

Expectations for Facebook’s revenue in 2012 have been lowered by $1bn by Emarketer, following the social network’s disappointing performance in the first half of the year.

Emarketer revised its Facebook forecast to state that it expects the site’s revenue to hit the $5bn mark this year, down from the insights firm’s previous estimate made in February of $6bn.

The reduced estimates reflect Facebook’s under-performance, evident from its Q1 and Q2 financial results. However, the forecast does still forecast a year-on-year growth in revenue of 31% from 2011 and also predicts it will generate $6.6bn in 2013.

Ad revenues for 2012 will reach $4.2bn, a 34.1% increase from 2011, reduced from a previous estimate of $5bn. This was partly due to questions raised about the effectiveness of advertising on the site. General Motors pulled its $10m Facebook ad budget earlier this year and a BBC investigation questioned the value of ‘likes’ on the site. Facebook has had several brands including Ford and Coca-Cola speak up in favour of advertising on the site. Earlier this month, UK online merchant Play.com also revealed figures which showed customers who are engaged with campaigns on Facebook spend on average 24% more than regular customers.

“Major marketers are still questioning the effectiveness of advertising on Facebook, and they are concerned that their ability to measure results is underdeveloped,” says Emarketer analyst Debra Aho Williamson. “Facebook is working on addressing these concerns, but it must move even more quickly.”

Facebook is pushing into different areas of revenue generation away from advertising. Emarketer also predicts strong growth from other sources including Facebook Payments. Facebook is expected to collect $811m from non-advertising sources this year, a 45.6% increase on 2011.

Facebook’s 2013 revenue is expected to be driven by the roll-out of its new ad exchange and the expansion of the company’s mobile ad business. Emarketer suggests that the site could get more use out of the Facebook Marketplace automated ad-buying platform, stating that it is a robust system and will support higher volumes of spending.

David Hing, London