Facebook 2012 Revenue Estimate Is Reduced by EMarketer

Facebook Inc. (FB) may post $5.04 billion in sales this year, EMarketer Inc. estimated, down from the market researcher’s earlier projection for $6.1 billion as the biggest social network struggles to sustain advertising growth.

EMarketer, which made its earlier prediction in February, now expects revenue to rise 36 percent in 2012 and 31 percent in 2013, compared with an 88 percent gain last year. Growth in advertising, which makes up the majority of Facebook’s sales, will slow to 34 percent in 2012 and 29 percent in 2013, from more than 68 percent last year, New York-based EMarketer said.

Facebook is grappling with questions from marketers about how well ads on its site are performing, said Debra Aho Williamson, an EMarketer analyst. While Facebook says it is working with companies to show that the ads have an impact with its 955 million users, the social network must move more quickly, she said.

Sales “haven’t been growing as fast as we and others had expected,” Williamson said. “There is still hesitation about the effectiveness of the advertising, about how much the advertising is worth.”

Still, revenue growth is seen “stabilizing” in 2013, she said. The company will get help next year from newer initiatives, including ads tied to searches and the Facebook Exchange, which lets advertisers reach specific types of users on the site based on their browsing history.

New mobile-ad services also should make a bigger impact next year as well, she said. These services weren’t a big part of the forecast for 2012.

Targeting Tool

Facebook is unveiling a new tool for marketers next week, said Elisabeth Diana, a spokeswoman for Facebook. The service will let advertisers use data they’ve collected from their own customers, such as e-mails and phone numbers, to target those users on Facebook, using a software tool that is designed to protect the members’ identities.

The company’s stock has lost half its value since Facebook sold shares at $38 apiece in an initial public offering on May 17. Facebook, based in Menlo Park, California, fell 1 cent to $19.09 at the close in New York.

The reduced sales projection for 2012 brings EMarketer’s estimates to 2.4 percent more than the $4.92 billion average prediction of Wall Street analysts, according to data compiled by Bloomberg. (B) EMarketer’s February estimate was 24 percent higher than the current average projection.

Last month, Facebook reported sales growth of 32 percent in the second quarter, down from 45 percent in the first quarter and 55 percent in the fourth quarter.

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

Enlarge image

Facebook 2012 Sales Estimate Is Cut by $1.1 Billion at EMarketer

David Paul Morris/Bloomberg

Growth in advertising, which makes up the majority of Facebook Inc.’s sales, will slow to 34 percent in 2012 and 29 percent in 2013, compared with more than 68 percent last year, EMarketer said.

Growth in advertising, which makes up the majority of Facebook Inc.’s sales, will slow to 34 percent in 2012 and 29 percent in 2013, compared with more than 68 percent last year, EMarketer said. Photographer: David Paul Morris/Bloomberg

4:03

Aug. 30 (Bloomberg) -- Michael Scissons, founder and chief executive officer of Syncapse Corp., talks about the outlook for advertising at social-media companies and Facebook Inc.'s potential to increase ad revenue. He speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)