Dive Brief:
- Facebook reported a 33% increase in revenue for a total of $13.73 billion for Q3 2018 — falling short of analysts' expectations for revenue totaling $13.77 billion — and the company’s lowest percentage increase in the past six years, according to The Wall Street Journal.
- New ad products are in the works for Stories, a feature the company said is growing but that it has yet to fully monetize. Other areas for potential growth cited by the company include video and private messaging. Mobile advertising grew to account for 92% of total ad revenue compared to 88% a year ago, according to a Facebook news release.
- Daily active users for September 2018 were 1.49 billion, a 9% year-over-year increase, but below the 1.51 billion expected, and monthly active users were 2.27 billion, up 10%, but below the projected 2.29 billion, according to CNBC. Facebook has about 2.6 billion users per month across its family of apps, including Facebook, Instagram, WhatsApp and Messenger, and about 2 billion people per day use one of the apps.
Dive Insight:
Facebook's Q3 performance is in line with the company’s previously reported expectations that engagement would continue to decelerate in the second half of 2018. Several factors likely are at play in Facebook's Q3 numbers. Currently, most of the company’s revenue comes from ads appearing on its Newsfeed, but the feature's revenue-generating capabilities are under pressure.
Executives said users are now embracing other features of the platform, including Stories, video and private messaging, which could be replacing time spent on the Newsfeed, according to the Journal. Additionally, some advertisers are seeing a negative impact on ROI following the Cambridge Analytica scandal and changes to the Newsfeed algorithm that prioritize content that is interactive and from family and friends over static one-way messaging. For Q2, Facebook’s revenue growth rate decelerated about 7 percentage points, and the company posted $13.2 billion for Q2, a 42% YOY increase.
During the call, Facebook CEO Mark Zuckerberg said the company will grow its investment in the company over the next year, including rolling out new products, and improving security, according to CNBC. He also discussed Facebook’s progress with Stories, a feature that’s growing, but that the company has yet to fully monetize. Facebook says it is working to build new ad products for the feature.
Facebook is already working to make Stories more attractive to advertisers. In September, the company began making Stories available to advertisers worldwide. Advertisers can add Facebook Stories to the Newsfeed or Instagram Stories campaigns, with targeting and measurement capabilities available, and support for Stories ads in Messenger will be added soon.
The digital advertising space has been dominated by Facebook and Google, with the so-called digital duopoly expected to control a combined 57.7% share of U.S. digital ad revenue this year, according to eMarketer projections. That share is down from 59.1% last year, as Amazon continues to surge. Amazon is expected to generate $4.61 billion in U.S. ad revenue in 2018, up from the $2.89 previously forecast, and now ranks No. 3 among digital ad platforms.
