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Google set to pass Facebook’s online ad revenue

3219BO-USA-FACEBOOK_LAWSUITS_O_ NONE*

No-Data-Available, MAY 23/Reuters

Google Inc. is set to become the biggest earner in U.S. display ads this year, taking the No. 1 rank away from Facebook Inc. and cementing its dominant presence in online advertising.

Google will claim 15.4 per cent of display ad dollars, or $2.31-billion, compared to Facebook's 14.4 per cent, or $2.16-billion, according to projections by eMarketer, a digital advertising research firm.

But it added that publishers across the board have been bruised by weaker-than-expected display advertising demand this year as large brands withheld splurging on costly digital campaigns.

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Since Facebook went public in May, the company has been under pressure from Wall Street to show how it can turn its giant social network into a money machine. Facebook shares have lost about 40 per cent of their value since the IPO.

Google's rising clout in display ads – the boxes with images and video found on websites – has come on the back of growth in video advertising on its YouTube subsidiary, as well as mobile advertising through Admob, a company acquired by Google in 2009.

Top display ad earners Google and Facebook were followed by Yahoo Inc., Microsoft Corp. and AOL Inc., which all have advertising networks across their digital content properties.

Facebook said this week that it would begin developing a mobile ad network that would allow advertisers to target ads using Facebook data across the web and not just Facebook's website.

Meanwhile, Facebook said it will start charging businesses to run Offers on its social network, turning a previously free service into a potential revenue generator.

Facebook launched Facebook Offers earlier this year, letting retailers and other local merchants send deals to their Facebook fans. Users claim the offers from their News Feeds and redeem the vouchers at stores to get discounts.

The service has been free, but in coming weeks Facebook will require merchants to pay at least $5 on related ads to promote each Facebook Offer to a targeted audience of fans and friends of fans. The cost will vary based on the size of a company's Facebook pages.

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The commerce potential of Facebook, known as f-commerce, has yet to materialize, partly because retailers have been able to feast on a host of free tools on the social network to attract customers.

Tying Facebook Offers to a paid ad service suggests the company is working to change this.

"We think this aligns incentives nicely," said Gokul Rajaram, director of product management for Facebook's advertising and Pages businesses. "The best results on Facebook Offers will come from organic distribution plus paid distribution."

Facebook is also expanding Offers to online-only businesses, he added. Before, the service was available only to merchants with physical locations The addition of barcodes for offers should allow customers to redeem offers more easily. The barcodes work globally, Mr. Rajaram noted.

The executive declined to disclose how many Facebook Offers have been run so far, how many merchants have taken part, or how many deals have been claimed and redeemed by consumers.

However, he said Facebook is "very happy" with the success of its Offers business.

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"That's why we're expanding and investing more in it," Mr. Rajaram said.

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