Face­book ads keep creep­ing into apps

The Denver Post - - FEATURES - By Bar­bara Or­tu­tay

Scrolling through an ad-free In­sta­gram is now a dis­tant mem­ory, much like the once ad-free Face­book it­self. Soon, users of its Mes­sen­ger app will be­gin to see ad­ver­tise­ments, too — and What­sApp may not be too far be­hind.

Wel­come to the Face­book ad creep.

The world’s big­gest so­cial me­dia com­pany has squeezed about as many ads onto its main plat­form as it can. The fancy term for this is “ad load,” and Face­book warned in­vestors back in 2016 that it has pretty much maxed it out. Put any more ads in front of users and they might start com­plain­ing — or worse, just leave.

As such, Face­book, a free ser­vice that re­lies al­most com­pletely on ads to make money, has to keep find­ing new and cre­ative ways to let busi­nesses hawk their stuff on its prop­er­ties.

One so­lu­tion is to spread ads be­yond Face­book it­self, onto the other pop­u­lar mes­sag­ing and photo-shar­ing apps it owns.

So far, it’s work­ing. On Wed­nes­day, Face­book posted a 71 per­cent in­crease in net in­come to $3.89 bil­lion, or $1.32 per share, from $2.28 bil­lion, or 78 cents a share, a year ago.

Rev­enue for the three months that ended on June 30 rose 45 per­cent to $9.32 bil­lion from $6.44 bil­lion. The Menlo Park, Calif.-based com­pany’s monthly ac­tive user base grew 17 per­cent to 2.01 bil­lion.

In­sta­gram

Ads be­gan ar­riv­ing on In­sta­gram, which Face­book bought in 2012 for $1 bil­lion, in 2013. It was a slow and care­ful roll­out, and tells us a lot about Face­book’s sub­se­quent ad strat­egy.

The com­pany didn’t want to up­set In­sta­gram’s loyal fans, who were used to scrolling through beau­ti­ful land­scapes, styl­ized break­fast shots and well­groomed kit­tens in their feed. An ad for headache pills would have in­ter­rupted the flow. So In­sta­gram started off with just a few ads it con­sid­ered “beau­ti­ful,” se­lected from hand-picked busi­nesses. For a while, CEO Kevin Sys­trom re­viewed every ad be­fore it went live.

Four years later, things have changed a bit, although to In­sta­gram’s credit, not so much as to alien­ate sig­nif­i­cant num­bers of its 700 mil­lion users (up from mil­lion in 2013). There are more ads now, Sys­trom no longer in­spects them be­fore pub­li­ca­tion, and while many still could be called “beau­ti­ful,” users also are likely to see generic ads not specif­i­cally cre­ated for In­sta­gram.

By this point, though, peo­ple seem to have got­ten used to them.

Mes­sen­ger

Face­book al­ready has been test­ing ads on its pri­mary chat app, and ear­lier this month it an­nounced it will ex­pand this test glob­ally. Par­al­lel­ing its ex­pe­ri­ence with In­sta­gram, Face­book told devel­op­ers and busi­nesses they can start show­ing ads — specif­i­cally for brands that peo­ple “love” or that of­fer an “op­por­tu­nity to dis­cover ex­pe­ri­ences” — to Mes­sen­ger’s 1.2 bil­lion users.

A tsunami it won’t be. Face­book prod­uct man­ager Ted Hel­wick wrote in a blog post that a “small per­cent­age” of Mes­sen­ger users will start see­ing ads by the end of July. The com­pany then will study that lim­ited roll­out to en­sure that it’s de­liv­er­ing “the best ex­pe­ri­ence.”

Of course, even a small per­cent­age of 1.2 bil­lion users could be tens of mil­lions of peo­ple. But this gives Face­book a chance to see what works and what doesn’t with­out mass re­volt.

And it high­lights the im­por­tance of Face­book’s de­ci­sion to spin out the Mes­sen­ger app from its main Face­book app (and to start pres­sur­ing peo­ple to use it ). While Face­book billed its de­ci­sion as a way to make Mes­sen­ger eas­ier to use, it also es­sen­tially dou­bled the avail­able real es­tate for its mo­bile ads.

In a con­fer­ence call with an­a­lysts on Wed­nes­day, CEO Mark Zucker­berg said he wants to see the com­pany “move a lit­tle faster” when it comes to ads on Mes­sen­ger, but added that he is “con­fi­dent that we’re go­ing to get this right over the long term.”

What­sApp and more

With its pop­u­lar­ity out­side the U.S. and in de­vel­op­ing coun­tries, What­sApp might be a harder nut to crack when it comes to ads. But there are signs it’s com­ing. It’s true that What­sApp’s CEO Jan Koum promised users they can count on “ab­so­lutely no ads in­ter­rupt­ing your com­mu­ni­ca­tion” when Face­book bought the com­pany in 2014 for $19 bil­lion.

But last Au­gust, What­sApp up­dated its pri­vacy pol­icy to re­flect that the ser­vice would be shar­ing user data with Face­book so that it could “of­fer bet­ter friend sug­ges­tions” and “show you more rel­e­vant ads” on Face­book and its other prop­er­ties.

That doesn’t mean that ads will ap­pear on What­sApp right away. But in the same post, the com­pany also said it wants peo­ple to be able to com­mu­ni­cate with busi­nesses, not just peo­ple. That’s ex­actly how Mes­sen­ger be­gan dab­bling in the ad­ver­tis100 ing busi­ness.

What else can Face­book do?

“One, they will raise their rates on ads,” said Matt Brit­ton, CEO of so­cial me­dia mar­ket­ing com­pany CrowdTap. “Be­cause they can. The value is tremen­dous for ad­ver­tis­ers right now, in­clud­ing for video ads.”

For eMar­keter an­a­lyst De­bra Aho Wil­liamson, Face­book video presents the big­gest op­por­tu­nity for ad-busi­ness growth. How peo­ple will re­spond to Mes­sen­ger ads re­mains un­cer­tain, she said. But with video, Face­book is do­ing what peo­ple al­ready know, tak­ing short and long-form pro­grams and in­sert­ing ads in the mid­dle.

That lets Face­book at­tract money from “tra­di­tional video ad­ver­tis­ers,” she said — mean­ing the folks who honed their tal­ents in­sert­ing ads into prime-time shows.

Elise Amen­dola, The As­so­ci­ated Press

Face­book has squeezed just about as many ads into its main plat­form as it can. Any more and users might start to com­plain. Now, ads are mov­ing on to Mes­sen­ger, and What­sApp may not be too far be­hind.

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