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Facebook's advertising growth slowed down a lot in the last year

June 27, 2012|By Salvador Rodriguez
  • A new report shows Facebook's advertising growth has slowed down dramatically in the last year.
A new report shows Facebook's advertising growth has slowed down… (Scott Eells / Bloomberg )

Facebook's U.S. advertising growth has slowed down to a third of what it was in 2011, according to a report issued Wednesday.

After growing at impressive rates in the 60% range during the first three quarters of 2011, Facebook's advertising growth fell by more than half to 30% in the fourth quarter, and during the first part of 2012, the growth rate went down to 21.2%, according to a report by the IDC.

The slowing growth has resulted in Facebook losing market share. After holding on to almost 14% of display advertising at the end of 2011, Facebook's share is now down to 12%.

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"They're still growing, but they're not growing as fast as they should," said report author Karsten Weide, the program vice president of media and entertainment at IDC.

Weide said there are two main reasons for the the social media giant's slowing growth.

The first is that unlike Google with search advertising, Facebook did not create its own segment. Rather, the Menlo Park company entered the display advertising market that was already populated by other players.

This, in turn, is limiting Facebook simply because there isn't too much more room to grow in this market the way there was for Google with search ads.

"They're just bumping into the ceiling of where they can grow," Weide said.

The other major reason for why Facebook is slowing down so drastically is because advertisers are realizing that display ads on the social network of more than 900 million people are simply not that effective.

"The effectiveness of advertising on Facebook is just really terrible," he said. "Advertisers are realizing that Facebook isn't as effective as they first thought. They're pulling their money and taking it elsewhere."

The report follows General Motor's decision to pull their Facebook funding last month, which happened just before Facebook's IPO and was a major blow to the company.

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