On August 11, news broke that Google had recently made changes to its Gmail email service, moving "Promotions" emails from the inbox to a dedicated folder. A team of analysts at UBS believes this change will reduce the effectiveness of email marketing and cause brand advertising budgets to shift towards Facebook, which can target display ads based on users' email addresses. This could indirectly help Facebook capture ad revenue from sites like Yahoo! and The New York Times.
The UBS analyst team pointed out that Facebook currently generates more advertising revenue per user than Yahoo! and AOL but still lags far behind Google. However, given the significant amount of time Facebook users spend on the platform, there is approximately four times the potential for growth in advertising revenue per user.
UBS is very optimistic about Facebook's upcoming video ads — analysts communicated with advertising agencies and learned that many advertisers are highly willing to purchase video ads on Facebook at a daily rate of $2.5 million. Additionally, UBS listed three companies threatened by Facebook's real-time bidding ad platform FBX: Yahoo!, ValueClick, and The New York Times. Executives from these three companies all admitted during their second-quarter earnings announcements that their display ad businesses had been "hit," were "unfavorable," or faced "tough challenges."
The UBS analyst team estimates that Facebook’s ad revenue will reach around $6 billion in 2013 and is expected to increase to $9.14 billion in 2014. Although Facebook’s Chief Operating Officer Sheryl Sandberg acknowledged during the second-quarter earnings call that the FBX business scale is still small, UBS has set a target stock price of $45 for Facebook and anticipates it could rise to $55. (Yoola)