CARIBBEAN TIMES NEWS has learned that three different recent moves by Facebook seem to suggest that the company is looking to aggressively expand its existing business beyond selling mostly display ads — the visual ads that appear in between “Stories” or as sponsored posts on Facebook and Instagram. In fact, we know that executives have been warning investors for months that these ads are nearing a growth ceiling on its main app. And analysts say engagement on Facebook’s main app (where it sells most of these ads) is declining, which puts even more pressure and stress on the tech giant to quickly adapt, adjust and find new sources of revenue.
Facebook has invested heavily in finding ways to increase display ad revenue on its other apps, primarily Instagram. But the latest reports suggest Facebook is also dabbling and testing a bunch of new revenue streams, including new types of advertising.
Facebook recently announced that its video platform “Watch” now has 75 million daily visitors. But that’s a small number when compared to how big Facebook’s total audience is. However, Facebook claims that small number is highly engaged, which if true, will help it sell more “brand” ads. Brand ads typically help businesses increase awareness, which is different from “display” ads, which help businesses sell goods through links.
Facebook is also testing search ads in its search results and Marketplace (its Craigslist-like community sales tab), in an effort to compete with Google for search ad revenue. The tech giant has long dominated the display ads business, controlling roughly 40% of the entire U.S. display ads market, while Google controls nearly 80% of the U.S. search ads market.
Facebook is also hoping to cut deals with premium cable channels, like HBO and Showtime, that would allow users to watch content from those channels on Facebook’s apps, and potentially even buy subscriptions to those channels through Facebook, with the platform getting a cut. This would be one of Facebook’s first real attempts to sell users products directly on its app.
Perhaps the reason Facebook is looking to find new ways to monetize within its main app is because display ads rely on user engagement, and that’s declining overall on Facebook’s core app. In fact, Facebook-related properties (Facebook, Messenger, Instagram and WhatsApp) accounted for under 14% of digital content consumption in November, which is down from its 18% share two years ago and 16% one year ago.
However, even if Facebook’s display business may have hit a ceiling, the company still has the potential to be successful in launching new revenue streams. There is no doubting that Facebook has had a rough year. It’s battled intense regulatory scrutiny in the U.S. and abroad, and it’s had the worst stock performance in its history over the last few months. A strong turnaround could help convince investors — including those more pessimistic ones — that their business is in good shape.