Facebook has warned that it expects advertising revenue growth to slow as it starts to limit the number of ads it puts on people’s timelines to avoid alienating them. Quarterly profits at the social networking giant surged by 166% to $2.4bn (£1.95bn), but shares dipped by 7% in after-hours trading after it warned that revenue […]
Facebook has warned that it expects advertising revenue growth to slow as it starts to limit the number of ads it puts on people’s timelines to avoid alienating them.
Quarterly profits at the social networking giant surged by 166% to $2.4bn (£1.95bn), but shares dipped by 7% in after-hours trading after it warned that revenue growth would slow.
The huge rise in third quarter earnings came as the social media firm saw an increase in revenues over the same period of 56%.
Much of the rise came from mobile advertising, which accounted for 84% of its total ad revenue in the third quarter.
The company took in a total of $7.01bn (£5.74bn) in the three months before 30 September, beating expectations.
Chief executive officer Mark Zuckerberg said in a statement: “We’re making progress putting video first across our apps and executing our 10 year technology roadmap.”
However, finance director David Wehner said ad growth was on course to slow “meaningfully” as it limits the level of adverts it puts before users to avoid turning them away.
He also indicated that 2017 would be a year of aggressive investment.
Another of its subsidiaries, photo sharing site Instagram, has also seen its advertising base grow, the firm said. The firm had 500 million users as of June.
Karl Knights, VP UK for Kenshoo, a Facebook marketing partner, commented on how this could impact advertisers: “We’ve now seen advertising spend through our platform on Facebook and Instagram grow 45% since last year – 61% on mobile devices – as advertisers becoming more comfortable with social and start to see better results. It’s inevitable and right that Facebook should seek to control the volume of ads appearing in the newsfeed to maintain a good experience for users. Eventually you would expect demand to start outweighing supply, meaning advertisers will have to start paying more for ad clicks.
“They’ll need to get smarter about ad strategy to help maximise return on ad spend. This will include a greater emphasis on ad targeting and personalisation using tools such as Facebook custom audiences to retarget people who’ve visited their websites or interacted on another channel for example – as well integrating Facebook even more into their broader marketing strategy. For example we’ve seen that integrated campaigns that target Facebook ads at people based on the search engine ads they’ve clicked on, perform significantly better.
“You’d also expect Facebook advertisers to increase their use of ad testing, generating multiple versions of ads and using audience-specific imagery and copy in order to optimise performance.”
