During an earnings call, Facebook CFO David Wehner disclosed that Facebook will soon hit the maximum number of ads allowable in its users’ news feeds. The Zest marketing gurus break down what this development could mean for the future of Facebook advertising.
Facebook CFO David Wehner recently revealed that the company will face an interesting challenge in the near future – by the middle of 2017, Facebook will have reached its maximum ad load on its flagship site.
Ad load is defined as the maximum allowable ratio of paid to organic content in a given Facebook user’s news feed. Once it hits ad load critical mass, Facebook will be unable to inject further paid content into its users’ feeds. The company would not answer questions regarding how it determines what ratio of paid and organic content to display, but assured investors that this strategy was not likely to change due to the approach of maximum ad load.
Facebook saw revenue increase by 45% in 2015, owed in large part to increases in ad sales. Last quarter alone, advertising earned the company $6.2 billion. However, Wehner indicated that similar revenue growth will not be possible in the coming years if Facebook advertising continues in the current direction. This begs the question: how will Facebook ensure that ads remain equally profitable and effective?
Although Facebook’s flagship product will soon cease to increase ad exposure, its other products still have plenty of room for growth. The company currently maintains ad space on Instagram as well as its audience network—a collection of partner apps that support and display Facebook ads. Facebook also owns several other apps on which it does not currently display ads, including Facebook Messenger and What’s App.
Constraints on ad load will likely increase demand for space, which may allow Facebook to profit more from each ad sold. Yet, in order to match the revenue of previous quarters, Facebook will likely also need to invent other avenues for increasing ad revenue. The outlets for continual revenue growth can essentially be broken down into two categories – user increase or improvement of ad quality. This may include:
- Improved sales lead functions
- Commercial-esque videos
- Improved ad targeting
- Additional ad features
- New Multi-ad formats
- Increased user sign-up benefits
Although this news may have come as a surprise to many investors, Facebook has been hinting at changes to its ad strategy for some time. In recent months, the company has been optimizing and diversifying its video content through the introduction of promising outlets like Facebook Live and premium video ad capabilities. These methods of advertising are currently largely untapped, and consequently an excellent opportunity for premium business exposure.
A versatile user strategy includes the continuing use of Facebook’s current advertising platforms, which continue to provide affordable and effective digital ad space. In addition, users should allow for an adjustment period for the roll-out and subsequent adaptation of new Facebook revenue-boosting initiatives, and the site’s resulting updates.
For more emerging marketing news, or information on how to maximize the benefits of Facebook for your business, contact the digital marketing gurus at Zest today.