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Facebook's Ad Juggernaut Approaches Middle Age

News Feed is nearly 11 years old, and ads have been a part of it for five years

May 18, 2017 | Media Buying | Social Media

Since 2012, News Feed ads have been the center of Facebook’s business. But the number of ads the company can show there is approaching its upper limit.

“As Facebook looks to new formats such as mid-roll video ads and messaging ads, concerns remain over video ad engagement, measurement and more,” said eMarketer analyst Debra Aho Williamson, in a new report on the company’s advertising revenue prospects. (The full report, “Facebook Advertising 2017: Five Factors that Could Rein in Future Growth,” is available only to eMarketer PRO subscribers.)

Net US Digital Display Ad Revenues for Facebook, Google and Snapchat, 2017 (billions)

Facebook’s News Feed is now nearly 11 years old (it launched in September 2006), and ads have been a part of it for five years. Concerns about ad load are putting pressure on Facebook to come up with its next big revenue drivers, said Williamson.

This report, based on extensive interviews with marketers and ad agency executives, digs into five factors that could affect future growth—and what marketers need to know about them. Some ad executives who spoke with eMarketer are ready for Facebook to deliver more ad formats that exist outside of the News Feed. They say that the Feed is cluttered and noisy, and they have difficulty making their ads stand out—even with Facebook’s targeting capabilities.

They also say that Snapchat’s purposeful avoidance of the feed structure is telling. “Does the way people are consuming content on Facebook or Instagram have to change to keep up with a more dynamic experience such as on Snapchat? I think the answer to that is absolutely yes,” said Ed Camargo, vice president of paid media at PMX Agency.

In addition, executives worry that a cap on ad load could mean higher prices for News Feed ads, as competition increases for ad slots.

Facebook “has driven revenues based on three factors—growing the user base, increasing time spent and adding more ads to each page—but its ability to add more and more advertisements to each page is beginning to slow,” said Steve Carbone, managing director and chief digital and analytics officer at MediaCom. “If this source of revenue declines, Facebook will have to ramp up the other two and reassess pricing.”

Facebook is taking steps to mitigate some of these concerns, such as by testing a tab in its mobile app that includes content it thinks a user might be interested in but that he or she may not have “liked” or followed.

If the test is successful, it could provide additional places to show advertising.

Williamson joined eMarketer’s “Behind the Numbers” podcast to discuss the next-phase challenges for Facebook.

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