Facebook’s next revenue opportunities: search, messaging and VR

Facebook’s ad revenues soared in its most recent quarter as a focus on video and mobile paid off, but the social network is already positioning for the next wave of revenues in search, messaging and virtual reality.

Facebook’s total revenue was up 59% year on year to $6.4bn (£4.8bn), with ad revenue rising by 63% to $6.2bn (£4.7bn). Of the ad total, mobile made up 84%, with revenues rising 81% year on year.

Facebook credited the huge growth on a “double-digit increase” in time spent in its apps, including Facebook, Instagram and Messenger. It has also benefitted from a focus on video, which has attracted more viewers and advertisers to its platform.

READ MORE: Facebook will be ‘all video’ in five years, says Nicola Mendelsohn

Speaking on a conference call following its results, CEO Mark Zuckerberg said he was “pleased” with the social network’s performance but said it is “only 1% into its journey”.

“Over the next three years, we’re focused on continuing to build our community and help people share more of what matters to them. The next five years are about building our newer products into full ecosystems, developers and businesses. And over the ten years, we’re working to build new technologies to help everyone connect in new ways,” he explained.

Zuckerberg said that two of its core businesses opportunities going forward – search and messaging – are only just starting the second phase of their long-term growth strategies. Although he believes Facebook has built a “consumer use case” for both, it is just at the start of making search and messaging work so that people can organically interact with businesses. The next phase is to get people interacting with business and build commercial opportunities.

“I would say we’re around the second phase of that in search now. We have a pretty big navigational use case where people look up people and pages and groups. But one of the big growing use cases is looking up content in the ecosystem and that is an area we’re vey excited about,” he explained.

Facebook currently has trending topics that aim to showcase discussions people are having on the site around events such as the US presidential election. But Zuckerberg believes that will, in the future, “be monetisable”.

Messaging is in a similar place. Speaking on the same call, chief financial officer David Wehner highlighted that its ‘Messenger’ app already sees one billion organic interactions between consumers and businesses each month but admitted it is still “incredibly early” in terms of actually making money from that behaviour. The same is true of WhatsApp.

Facebook also sees a big future in virtual reality. In Q2, more than one million people a month were using Oculus, its VR play, on mobile through a partnership with Samsung and its Gear VR device. And there are more than 300 apps available.

Zuckerberg believes that the success of Pokémon Go shows that the future of virtual reality and augmented reality is in the phone.

“I, like everyone else, am enjoying Pokémon Go.”

Mark Zuckerberg, CEO, Facebook

“The biggest think we can take away from this as we invest in augmented reality, in addition to virtual reality, is that the phone is probably going to be the mainstream consumer platform where a lot of these AR features first become mainstream rather than glasses form factor that people will wear on their face,” he said.

There is a stage dedicated to social media at the Festival of Marketing, which is running on the 5 and 6 October at Tobacco Dock, London. For more information about the event, including how to book tickets, click here.