Facebook Looks to WhatsApp, Video Ads for Future Growth

Facebook reported a 71 percent jump in profits in Q2 this year, even as the company is running out of room for more advertisements on News Feed, its primary source of revenue. Both Facebook and Google, which established the digital platform for ads as dominant, are faced with thinking about what comes next. As reported earlier, Google ads have surged 52 percent on mobile devices and YouTube, but its per-click revenue is down. Facebook is eyeing Messenger and WhatsApp, its two chat apps, for growth.

The Wall Street Journal reports that, according to Pivotal Research, Facebook and Google accounted for 99 percent of the online ad industry’s growth last year. Facebook chief executive Mark Zuckerberg “predicted video would become the largest driver of Facebook’s business over the next two to three years, while messaging could yield dividends within five years,” and “artificial intelligence could help advertisers figure out which audiences to target on Facebook.”

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But Facebook still needs to figure out how “to​ build new types of ads that can work outside the standard stream of posts that make up Facebook’s news feed and its photo-sharing app Instagram.”

Zuckerberg’s focus on messaging is due to its growth: one billion people a day use WhatsApp. The company introduced ads on Messenger, “a rollout that will inform how Facebook monetizes WhatsApp.” Jackdaw Research senior analyst Jan Dawson notes that, “today, one of every seven to 10 posts is an ad in Facebook’s news feed.”

But Zuckerberg’s desire for the company to become “video-first” is “part of what’s going to expand the inventory of ads on Facebook,” added Dawson. One weak link is that, “many advertisers are still repurposing television ads to use on Facebook,” which, says chief operating officer Sheryl Sandberg, “do not work as well as ads that are natively mobile.”

TechCrunch notes that WhatsApp Status, Facebook’s version of Snapchat Stories, has 250 million daily users, “despite it being relegated to a secondary dedicated tab in the app, opposed to being front and center on the home screen like Instagram Stories, which also now has over 250 million users.”

WhatsApp has 1.3 billion monthly users and 1 billion total daily users, meaning “a remarkably high 76 percent of WhatsApp’s monthly users come back daily” and send “over 55 billion messages per day, including 4.5 billion photos and 1 billion videos.” By comparison, Snapchat “has 166 million daily users of its entire app.”

TechCrunch also notes that, “the rapid global growth of WhatsApp Status in the first 6 months since it launched in February demonstrates that Snapchat left a huge market open for exploitation by focusing on U.S. teens instead of kids all around the world.”