Facebook’s ad business saw revenues jump again as the social network shook off growing concerns from marketers about measurement, transparency and viewability.
The social network’s revenues were up 51% in the fourth quarter to $8.8bn (£6.9bn), while net income came in at $3.5bn (£2.7bn). Facebook now has 1.9 billion monthly active users, with 1.2 billion of those logging on every day.
The revenue jump beat analyst expectations and comes despite Facebook’s admission last year that it had made metrics errors and growing concern from marketers, including Procter & Gamble’s chief brand officer Marc Pritchard, over the general accuracy of measurement of digital advertising.
Perhaps unsurprisingly, the issue of metrics came up a number of times on Facebook’s analyst call following its results announcement last night (1 February). COO Sheryl Sandberg batted away a lot of the questions, admitting that while there has been “concern”, the social network is “working hard” on the issue.
“New platforms demand new measurement, and so people are measuring all kinds of different things from viewability to how many people see the ad to how long they run the ad. We’re focused on all of these metrics and working hard with third parties and with our advertiser to get those metrics right,” she said.
“We really believe that at the end of the day what matters the most is all the way through to sales. What matters the most is the A/B test that these people saw ads on Facebook and Instagram, these people didn’t, and here’s the sales lift. And all of the other metrics, although important and we’re working hard, are proxy metrics, and those metrics are going through a platform shift that we need to work on.”
Moving beyond the news feed
Facebook has made the majority of its ad revenues from the news feed thus far. However, it admitted it’s reaching the limit of the number of ads it can show people in the news feed, both on desktop and mobile, and will have to stop adding more by the middle of 2017.
Analysts expect revenue growth to slow this year but Facebook execs said they have a number of options in the pipeline to ensure growth continues.
First of those is its new video tab. Facebook CEO Mark Zuckerberg said it has a “different intent” to how Facebook is used today, with the aim of making it a place users come to “watch videos, keep up-to-date on what’s going on with their favourite show or a public figure they want to follow”.
“[It’s about knowing] they can come to Facebook and go to place knowing that that’s going to show them all the content that they’re interested in,” he said.
“That’s a pretty different intent than how people come to Facebook today. Today, for the most part, people pull out Facebook when they have a few minutes, when they want to catch up and see what’s going on in the world with their friends and in the news. That’s very different from saying ‘hey, I want to watch video content now’. And that’s what I think we’re going to unlock with this tab.”
That also provides new revenue opportunities. Zuckerberg envisions professional content makers wanting their content to appear there, “as long as they can make enough money to support their business model”. That would see Facebook taking on other video streaming portals such as YouTube as a destination for quality video content, with plans to introduce mid-roll ads to make it more akin to the TV experience.
Beyond video, Facebook also sees opportunities in monetising messaging, though Zuckerberg says WhatsApp and Facebook Messenger are likely to have different business models. For Messenger that is likely to involve ads, while for WhatsApp it will be more about giving brands the opportunity to communicate with customers.
“The monetisation paths are going to be somewhat different, reflecting the differences in product philosophy. Messenger is much more focused on being an expressive and rich environment, whereas WhatsApp is a much more utilitarian experience,” he explained.
“We did the experiment around ads and Messenger and different ways that businesses can interact and there’s a lot of flexibility around how we can explore there, which is why I think you’ll see more of that on the Messenger side than on the WhatsApp side in the near term. But giving businesses the opportunity to connect in WhatsApp and reach the people that they want and eventually have increasingly, hopefully, transactional interactions I think will be a really useful thing on that platform as well.”