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March 30, 2011

Facebook's Revenue Per search to Decline

The average advertising revenue generated by Facebook for every 1,000 searches conducted on its website has declined from an estimated $8 to $5 currently, according to Trefis. 

The firm expect Facebook’s RPS to decline over time as Facebook is not yet a search engine at its core like Google, Microsoft’s Bing or Baidu - or an open web portal like Yahoo or AOL and thus requires users to login to run searches. Also the international mix of total searches increases will lead to RPS decline, Trefis also said. "While we expect Facebook’s RPS will fall to $3.20 per 1,000 searches by the end of Trefis forecast period, Trefis members predict a relatively flatter level of $4.70 per 1,000 searches."Its current valuation for Facebook is $45.10 billion.

Revenue per Page View (RPM) represents the average text and display advertising revenue that Facebook earns for every page view of, which is dependent on prevailing ad rates, the number of ads shown per page, the type of ads used and the nature of the ads.

Trefis estimates that Revenue per Page View (RPM) has declined from around $0.58 per 1,000 page views in 2006 to around $0.38 per 1,000 page views in 2009.

Social networking sites are mostly used for communication rather than seeking information on products and services.  This primarily explains why Facebook's RPM is low in comparison to search ads and ads on online commerce sites