Can Facebook and Twitter Dethrone the King of Online Advertising?
Social media companies like Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) really only have one true way to make money, and that’s through advertising. The bread and butter of their business is to bridge the gap between users and marketers — to facilitate an exchange of information between those two parties and to get paid for their services.
The proof is in the pudding. In the third quarter, Facebook generated revenue of $2.02 billion, 89 percent of which came from advertising. Twitter generated 89 percent of its revenue for the nine months ended September 30 through advertising. The beating heart of each business is its ability to court marketers and its ability help them develop targeted, effective advertising strategies without jeopardizing the integrity of the service.
But despite their dependency on advertising dollars, Facebook and Twitter don’t rule the roost. According to eMarketer, Google (NASDAQ:GOOG), with its iron first clenched around search, took in 40.9 percent of all digital ad revenue in 2012. This compares to just 5.9 percent for second-place Facebook and 0.6 percent for Twitter, which holds the eighth seat in the pantheon of online advertising giants.