Facebook ads follow users into every nook
san francisco — Facebook keeps finding new and potentially annoying places to sell advertisements in its digital hangouts. That’s good news for the company’s bottom line, but it also may signal weakness.
Along with Facebook’s controversies of late have been a steady drip of disclosures about fresh spots for Facebook’s paid commercial messages. The company recently started testing different types of ads in Marketplace, its Craigslist-like section for people to buy and sell merchandise, and in Facebook Stories, its Snapchat-like video diaries.
One of its executives told Recode this week that the company was experimenting with video commercials that play automatically in its Messenger chat app. Any minute now, I expect WhatsApp will start carrying advertisements for the first time after its CEO quit over disagreements that included selling ads in the private chat app.
The lesson of Facebook’s six years as a public company is that it’s incredibly adept at making money, largely by finding new places to stick ads and by tailoring them to the specific needs of hotels, e-commerce businesses or other companies trying to reach potential customers.
It’s only logical for Facebook to keep extending the reach of its ad placements into hangouts where people are spending more time — and right now those include Facebook-owned Instagram, its video diaries, Messenger and WhatsApp, while the main social network fades somewhat in popularity. Among US teenagers, Instagram, YouTube and Snapchat are much more essential than Facebook.
Finding more spots in which to place ads is an effective strategy only because they get results. (Yes, that means you, guy who says he is immune to advertising.)
It’s only logical for Facebook to keep extending the reach of its ad placements into hangouts where people are spending more time
But Facebook’s recent mini flurry of new ad types, and occasional reports of ever-higher prices, feel like evidence that the company is running short of places to sell commercials on its main social network. It follows that Plan B is to find new places to put them.
The question is, why is Facebook running out of ad room? Is it because people are using Facebook less or differently, because there’s so much demand from advertisers, or both? The answer is impossible to know for sure, but it’s important to Facebook’s future.
Facebook could be running out of room to sell ads because of continued deliberate choices to favour messages from friends, family and other people users know over those from paying customers. Facebook has been saying for a couple of years that it can no longer increase the ratio of ads to unpaid posts.
Facebook also said changes the company has made in recent months to stress quality over quantity of time spent on Facebook might crimp the amount of time people spend there. (It’s also possible this policy change masked an existing trend of people using Facebook less avidly.)
In any case, whether people are using Facebook less or the company is tilting the scales in favour of friends, the pool of available ad spots will grow more slowly. Or put a different way, demand from companies that want to buy Facebook ads is outstripping the potential ad slots. That pushes up prices. Some avid Facebook advertisers are complaining that social network ads are getting too expensive for them. — Bloomberg