Facebook Challenge: Attract More Advertising Dollars Beyond the Main Platform

The pressure is on now as the company faces a paradigm shift after its shares fell by nearly 19% on Thursday after a warning that its growth will slow down until the end of the year.

The biggest drop ever in Facebook shares, which followed its quarterly earnings report on Wednesday night, razed nearly $ 16 billion from the CEO position

Mark Zuckerberg.

The 14-year-old company has generally taken a slow and steady approach to generating revenue from its various services. Instead, Mr. Zuckerberg was more eager to get a public first – and then sell advertising to these users later.

But the main application of Facebook, called "Big Blue", begins to show signs of age. The base of Facebook users in the United States and Canada is stagnating, while in Europe, it drops slightly in the second quarter, partly because of the stricter privacy laws adopted in may.

Cambridge Analytica inaccurately accessed information about 87 million Facebook users. The company has recently tweaked some of its products to allow users to opt out of certain types of targeted ads after the resulting fury.

Some external data released earlier have already shown that Facebook users spend less time on the platform. By the end of 2016, its advertising growth rate has finally slowed down.

But the magnitude of the decline surprised Wall Street and some badysts have speculated that Facebook was deliberately conservative to avoid further regulatory scrutiny. Avenue was less surprised, as the digital advertising market grows worldwide.

Digital advertising expenditures will account for 43.5% of the $ 628.6 billion spent on advertising in 2018, up 17.7% from last year. eMarketer closes. Growth in digital advertising spending between 2021 and 2022 is expected to slow to 8.6%.

It is estimated that Facebook controls this year 18% of the global market for digital advertising, behind Google, which will take 31%, according to eMarketer. The problem for Facebook is that its fastest growing ad category is not as profitable as its old standby.

Chief Financial Officer

Dave Wehner

said on Facebook's revenue appeal that while users were gathering to consume content through its Stories format – photo and video montages that disappear after 24 hours – this kind of experience does not generate as much of revenue as advertisements in Facebook and Instagram feeds. ] Wells Fargo badysts estimate that the ads generated in Stories generate about $ 1 per user per day, compared to $ 9 for ads in users' Instagram feeds and $ 27 for ads in the Facebook feed.

gain comfort with the Stories format and find that advertising on the platform is effective. Facebook plans to test ads in WhatsApp Status, a similar feature.

"The results so far are very promising, but what we need to look more, are the trends over time"

Sarah Hofstetter,

president of the 360i digital agency, which works with clients like Hudson's Bay Co., National Geographic Channel and Kate Spade.

Instagram Stories, considered a Snapchat clone, launched in 2016 and has 400 million active users per day. Facebook Stories followed in 2017 and reached 150 million daily active users in May. Meanwhile, nearly 1.5 billion people use Facebook and its news feed every day; This audience is relatively unmatched for advertisers seeking to reach a large online audience.

From a user's point of view, stories may require a new behavior of dragging up to interact with an advertisement rather than clicking on a web link.

"Some of the campaigns that we are conducting [on Stories] give good results from the point of view of the brand: good results, a certain uprising"

Deborah King,

Paying Social Services Manager for Europe, the Middle East and Africa at the Essence Digital Agency, whose client list includes Google and NBCUniversal. "The next question we are looking at is: is it because it was on Stories, or on creation?"

WhatsApp, too, could be a source of advertising growth. The co-founders of WhatsApp, which Facebook acquired for $ 22 billion in 2014, were notoriously against targeted advertising. But they left the company earlier this year and Facebook executives said they would be open to introducing advertising into the messaging application.

With over 1.5 billion monthly users, WhatsApp has the same expectations as advertisers. on the application, which offers end-to-end encryption, Facebook will need to be cautious when deploying advertising products.

"It's a bit of the other shoe that's been waiting for a long time," Noah said. Mallin, Head of Experience, Content and Partnerships at Wavemaker North America, a media agency.

Write to Deepa Seetharaman at [email protected] and Lara O'Reilly at lara.o [email protected]