So far everything has been going great for Facebook Inc (NASDAQ:FB). The social media giant has made a lot of progress in growing revenues as well as its user base. Revenues for the company have grown to a high of $25 billion while the user base currently stands at 1.7 billion. But therein lies Facebook’s challenge in the coming year – maintaining the growth momentum.
To continue the growth trajectory, Facebook needs to figure out how to keep increasing advertising revenues. This will not be an easy task since it is already the biggest social media company in a relatively new sector. This is complicated by the fact that the ad servings on its platform have already reached full potential and any move to raise that could have detrimental effects.
Ad load
In an earnings call, Facebook’s chief financial officer, David Wehner, seemed to predict that the ad load will reach a saturation point in the next half of next year.
“We anticipate ad load on Facebook will continue to grow modestly over the next 12 months and then will be a less significant factor driving revenue growth after mid-2017,” said Wehner.
The next frontier
The social media giant is already betting on growing revenues from video ads as video viewing on the platform increases. Currently, the number of times videos are viewed on Facebook has increased eightfold to 8 billion from a year ago when that figure was 1 billion per day. On mobile devices, users watch a combined 100 million hours of video daily on Facebook. An even bigger hit with users is Facebook Live video which attracts more user engagement and interaction than other video offerings.
But as healthy as video ads are looking for Facebook, analysts say video advertising is a bubble waiting to explode. It is also a sector that has other entrenched players like Alphabet Inc (NASDAQ:GOOGL) YouTube which will fight to maintain its market share. And there’s also Snapchat to worry about since the startup looks determined to take on Facebook.
In the most recent trading session held on December 23, 2017, Facebook edged downwards by 0.11% to close the day at $117.27 a share.
