Revenue increased 11.9% in Q1 of 2015, to $17.26 billion compared with $15.42 billion in the year-ago period.
Facebook rolled out new ad formats. But the social network has to be careful.
One number stood out yesterday at the Facebook Marketing Conference in New York. 16%. That’s the percentage, on average, of content created by friends and brands on the social network that a consumer sees. That number hadn’t been mentioned by the social network before. And it’s a rather meaningful statistic because it means there are an awful lot of posts—both from retailers and friends—that shoppers aren’t seeing.
That number also means that notion of Facebook offering retailers a “free” marketing opportunity is over. Creating a page, monitoring and responding to comments on that page, creating incentives for consumers to interact on the social network, none of that was ever really free in the respect that it required—at a minimum—time from staff that they could be devoting to other efforts. But in terms of a financial outlay, the costs were small.
Even if a retailer used the social network’s self-service Marketplace ads, which appear on the right-hand column of pages, the costs could be minimal because Facebook enables brands to finely target specific customer niches, such as women between 30 and 35 who Like the short-lived TV program “The Paul Reiser Show.”
But most consumers aren’t leaving the news feed, the first page a consumer sees when logging on to Facebook, which means they wouldn’t see Marketplace ads. And to get an ad in the right-hand column next to the news feed requires a marketer to work with the Facebook sales team, or an agency, to buy Premium ads. The social network’s Premium ad service combines a brand’s Page posts with social context—that is, the information that Facebook users reveal about themselves, such as what they Like. For instance, a Premium ad might show that “You and Jim Squires Like the Ides of March,” a reference to a movie released last year. Below that interaction is a “Recent Post” heading from the film’s page that noted “Rolling Stone calls Ides of March ‘A big, bruising thriller,’—Peter Travers” along with a video clip that appeared in the same post on the film’s page.
Or, if they really want their ads to be seen, they can work with Facebook’s sales team to leverage a new service called Reach Generator, an algorithmic tool that determines the placement of ads across a different locations, such as the news feed on both a computer and mobile device and on the log-out page. Marketers with an undisclosed minimum number of fans can use the Reach Generator to guarantee their ads will be seen by 75% of their fan base each month. But it will cost them.
It’s clear from these new ad options that Facebook wants to boost its bottom line by selling more ads. That makes sense, especially since it was clearly leaving money on the table because, until yesterday, it didn’t have a single ad format that would be seen by its roughly 425 million active users who access Facebook via a mobile app. And the best way to generate revenue is to attract bigger companies willing and eager to spend more money on the social network.
But Facebook has to walk a delicate line between generating revenue and turning off consumers because of too many ads. Facebook says that because the new ad formats don’t look like a traditional ad—they amplify the brand’s regular posts—they aren’t off-putting. But consumers will be the judge of that, especially if they start to see more posts from Starbucks than from their friends from college. Facebook says that, for now, most consumers will only see about one ad in their news feed per day. But if the ads prove successful, and big marketers want to increase their spend, it will be awfully tempting to increase that number.