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Facebook Increases Ad Prices 40% on Rising Popularity, Marketing Firm Says

Ads on Facebook Inc.’s site cost 40 percent more per click last quarter than in the previous three months, as the company’s social-networking dominance let it command higher prices, according to Efficient Frontier.

The increase was on Facebook’s self-service ads, not the higher-priced premium ads that run on user home pages, said Siddharth Shah, senior director of business analytics at Sunnyvale, California, based-Efficient Frontier.

“As advertisers are understanding this medium, they are allocating budgets, and it’s becoming increasingly competitive,” said Shah, whose firm helps companies buy online ads. “They are willing to pay a lot more to get to the consumer.”

Facebook, which has more than 500 million users, is parlaying its burgeoning popularity into higher ad revenue. Advertising spending on the site will more than double to $4.05 billion this year, according to research firm EMarketer Inc. in New York.

The company may have reached $2 billion in sales last year, three people familiar with the matter said in December. Facebook announced in January that it raised $1.5 billion from investors led by Goldman Sachs Group Inc., placing a $50 billion valuation on the closely held business.

Facebook, founded in 2004, passed Google last year to become the most visited website in the U.S., according to Experian Hitwise, an Internet-tracking company in New York.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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