Facebook earns a huge amount of money by means of advertising. Last quarter, it earned $6.2 billion alone, but now the social media company is running out of places in the news feed to promote advertisements. It’s not a big issue (or even an issue at all), however, as it has a lot of other places where it can show ads.
Facebook approaching news feed ad limit
Facebook is going to hit the limit on the quantity of ads it shows to users of its flagship product, CFO Dave Wehner suggested. This means the social networking site will need to discover different ways to develop its ad business and keep it moving forward.
“The optimal ad load is really a mix of art and science,” Wehner said. “We also want to be thoughtful about making sure each person’s overall feed experience has the right balance of organic and ad content.”
Warren Buffett: If You Own A Good Business, Keep It
This was shocking for analysts, and many asked Facebook officials to elaborate on what this means. It simply means that the social media giant will need to do one of two things. Either the company must make better-performing ads that it can offer for more cash, or it can add more users to its network. The tech giant will ideally do both options, says Re/code.
Other options to show ads
Last quarter, Facebook added 60 million new users, and its user growth is already on the rise, but the second option of “creating better ads” seems tougher for the social media giant. Either it will need to do a better job in proving that its ads lead to sales (something it is currently attempting to do) or it will need to offer more premium promotions similar to the ads you see on TV.
This is one of the reasons the social media giant is touting videos aggressively, especially live-stream videos, but premium video advertisements can be difficult to sell on smartphones, the place from where Facebook gets the lion’s share of its business, Re/code says. On the earnings call, Facebook COO Sheryl Sandberg said the company is searching for more short-form video content from its partners. This strangely sounds like the type of content one could pair with premium video ads.
Nevertheless, the good news for the tech giant is that its flagship product is not its sole revenue driver. It has a lot of products where it offers advertisements. For example it shows ads on Instagram, and in the future, it might even sell ads on WhatsApp, Messenger and Oculus.