The Stakes Are High for Facebook’s Next Big Ad Product
Even after back-to-back quarterly wins, the heat is still on for Facebook to knock its next ad product out of the park.
Take a look at the market performance Wednesday afternoon. After delivering another quarter of stellar earnings numbers, Facebook CFO David Ebersman said something that made investors twitch: Facebook won’t “significantly increase” the number of ads it is sticking into users’ News Feeds — the current biggest driver of Facebook’s money machine.
The big bet for Facebook instead: Improving the quality of its existing ads.
That’s sort of a no-brainer. Make the ad look as “native” as possible, and it’ll probably perform better. It’s all the rage these days with competitors like Twitter.
Investors were spooked at Ebersman’s words nonetheless. After shares first surged 15 percent after hours on the original numbers, the stock plummeted back down to its closing price when Ebersman mentioned ad load, and ended up ultimately trading down — $18 billion in market value lost in a matter of seconds.
So the onus, then, is on Facebook for its next big thing. Will it be the long-awaited video ads, which look likely to auto-play inside the News Feed as users scroll through? That’s certainly one way to get higher-value ads without upping load. And let’s not forget Instagram, which also recently stated it would start dipping its toes into in-stream ads.
The company is treading very carefully. In-stream videos could be much more intrusive than the ads we’re seeing these days. Facebook doesn’t want to upset its users by sticking a bunch of auto-playing ads in our faces in the wrong way. That’s why the product has been delayed multiple times, and why the tests have come slowly but surely.
A quick aside: Seems almost silly for the Street to punish Facebook for stating it won’t increase ad load. If you jam the stream with even more ads, it’ll only serve to make the customer experience worse, right?
But maybe investors realized that, too; shares of Facebook were trading up nearly five percent Thursday morning, at around $51.