Facebook’s Overheated Market for Advertising

Facebook’s rapid monetization has been something to behold. The company had $6.2 billion in advertising revenue in the second quarter of this year alone.

It is, however, becoming a victim of its own success. According to Facebook’s CFO, the company has about maxed out on the number of ads it can show users in the News Feed.

This constraint is not driven by the market, but rather by the company’s own desire to balance each user’s experience with the optimal mix of organic content and advertising.

Movéo insight

Advertisers are clearly getting results on Facebook, and that’s why 60% of them expect to increase ad spend there in 2017. This means the ad “real estate” problem may get worse before it gets better.

Facebook already sells ads on its Instagram property. Now, according to the podcast Perpetual Traffic, it is testing sponsored content inside its popular Facebook Messenger platform. Moves like this will help it relieve pressure on the News Feed, but only so much.

How will Facebook grow advertising revenues in the future? 1) Add more users, 2) Create more profitable ad units, 3) Sell more ads on its other properties.

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