Follow The Bouncing Valuation

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Market research firm eMarketer, which has been revising downward its estimate of online advertising this year, plans to revise upward its projection for Facebook's ad revenue in 2009 and 2010.

In a blog post Thursday, eMarketer analyst Debra Aho Williamson said Facebook had "blown past" her earlier projection of $300 million in global ad sales for this year, and indicated that she would provide an updated estimate in her next report on social network advertising.

Earlier this year, Facebook board member Mark Andreessen said the company was on track to surpass $500 million in revenue and be making billions in five years. Founder and CEO Mark Zuckerberg hasn't provided any revenue projection, but said in September that Facebook was generating positive cash flow a year ahead of schedule.

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Williamson cited recent forecasts from TBI Research (part of The Business Insider) and private equity firm NYPPEX, respectively, projecting Facebook revenue of $1 billion and $710 million in 2010. TBI pointed to success coming from branded display advertising carrying high CPMs, a strong self-serve ad program, viral campaigns and the sale of virtual goods.

Whatever the company's actual revenue figures, "one thing is certain: Based on my recent discussions with agency executives and other industry insiders, Facebook is now the premiere destination for marketers who are using social media," wrote Williamson. She added that next year, companies will spend millions to build out their Facebook fan pages, which in many cases are becoming more important as marketing vehicles than their corporate pages.

"The question will be just how much marketers will spend to buy paid advertising on the site," noted Williamson. "Facebook will need to keep pumping out the ad innovations, and it will need to give marketers proof that the advertising works."

When marketers and agencies discuss the value of social media, it's usually in terms of earned media rather than paid media. Facebook, for instance, will not see any of the millions companies invest to create or build out fan pages because they're free. (It can benefit indirectly when marketers run self-serve campaigns on Facebook to drive traffic back to their pages.) Convincing companies to buy paid advertising to boost direct marketing efforts on Facebook will be a key measure of success.

While mobile has not factored into Facebook's revenue picture so far, Williamson expects that to change in 2010 as the company starts selling mobile advertising "in the near future." The company says more than 65 million people are accessing Facebook via mobile devices, and that nearly half of them are more active on Facebook than non-mobile users.

For all its growth, one area where Facebook has repeatedly stumbled is in privacy policy. Its latest privacy initiative launched last week encouraging users to share information more widely has triggered a backlash from users and led to a complaint being filed by the Electronic Privacy Information Center (EPIC) and others with the Federal Trade Commission. A previous privacy snafu forced Facebook to kill its Beacon ad program.

But Williamson doesn't expect Facebook's privacy problems to stall its upward ad trajectory. "Facebook has shown remarkable resilience in overcoming its gaffes over the years. Its users seem to keep coming back, even if they are temporarily unhappy. I don't foresee a mass exodus of members as a result of this current issue," she wrote in an email message.

It certainly hasn't scared off investors. Russian investment firm Digital Sky Technologies has reportedly increased its stake in Facebook to 5% after investing $200 million earlier this year for a 1.9% stake. Facebook declined to comment on the report originating with Russian business newspaper Kommersant.

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