Close

Not a member yet? Register now and get started.

lock and key

Sign in to your account.

Account Login

Forgot your password?

Facebook Whisper

Facebook Whisper
 

Research Question: Can Facebook entice large national brands to increase advertising on its site?

Companies Covered: Facebook (FB), Google (GOOG), Twitter (TWTR), Yahoo (YHOO), LinkedIn (LNKD)

Report Available: Jan. 23, 2015

 

Blueshift’s initial research shows Facebook ads have tripled in price as it succeeds with newer products, but stands to lose a significant portion of its revenue if venture capital firms stop funding app development projects.

 

Observations

  1. FB reported yet another solid quarter in Q3, beating expectations. Average revenue per user (ARPU) grew sequentially from 08% in Q2 to 15.91% in Q3,indicating that its new ad offerings like premium video and Audience Network may be generating material growth. FB projected sales in Q4 would be softer than Wall Street expected and its spending would increase 50% to 70% in 2015. Recently, competitors GOOG and TWTR reported softer revenue or user growth. FB is projected to take 8% of the $140.7 billion global ad market this year, up from 5.8% last year, according to eMarketer.
  2. FB’s higher-quality ads, including improved targeting and premium video advertising, tripled in price compared with last year. It also said small venture-backed app developers are becoming a less significant percentage of revenue as it focuses on growing its ad business with larger national brands. Facebook said brands will no longer be able to post overly-promotional content on their own FB pages, which may be the catalyst to get large brands to spend ad dollarswith FB instead. Additionally, a call-to-action button in Facebook’s mobile ads has produced an overall click through rate increase of 2.85x. Another highly anticipated positive for FB is when it finally loosens ad limitations on Instagram, where several large brands have seen engagement rates 58 times higher than FB and 120 times higher than TWTR.
  3. FB has not yet seen a significant number of traditional brands spending on its mobile platform. FB’s efficacy is diminishing, according to Forrester Research. Only .07% of fans interact with top brands’ FB posts. Forrester suggests email marketing as a much more effective free method for big brands to reach its audience. User time spent on FB is fallingand a recent study shows that more teens are fleeing from Facebook with 88% of 13- to 17-year-old social media users on Facebook in 2014 compared to 94% in 2013 and 95% in 2012. A leaked email from Snapchat CEO Evan Spiegel to a Sony executive detailed his belief that FB will implode once venture capital firms shut off the spigot to app developers who fail to effectively monetize their products. Spiegel believes that the fallout from this move could cause FB’s valuation to fall similar to YHOO’s in the 2000 tech bubble crash when YHOO lost 92% of its valuation because most of its ad revenue came from venture-backed doomed-to-fail dotcoms and not traditional brand advertisers.
  4. Blueshift’s  21 reportfound spending growth on FB ads to be slowing, however it would continue to dominate with products like autoplay video ads and emerging technology such as the Atlas ad network improving consumer targeting. Ad prices were found to still be rising, and ROI for advertisers continued to be strong thanks to reach, measurement tools, and advanced targeting capabilities. Sources in Blueshift’s May 21 FB report agreed that FB’s extensive targeting capabilities, its status as the social identity for consumers, and the sheer volume of its users will help it claim a leading share of mobile advertising dollars. FB’s new mobile ad exchange, FB Audience Network, would be popular and could reap major rewards. FB’s cost of advertising was escalating, especially for brands that now must pay to get content into a user’s News Feed, as well as cost-per-click and cost-per-engagement FB ads.

 

To determine if FB’s new products can hook larger brand advertisers to offset losses from fewer app install ad purchases, Blueshift will gather data and issue a market research report from independent sources in the following areas: large national brands, app install advertisers, large ad agencies, small and mid-sized digital ad firms, FB preferred marketing developers, application-focused venture capital firms, and industry specialists.

 

To see other ideas Blueshift Research is currently working on, please click here.