If you follow Facebook’s investor calls, you’ll know that during the past few, Facebook CFO David Wehner discussed their plans to begin slowing down the ad load’s growth rate. Facebook’s ad load is the ratio of ads to News Feed posts that a user sees.
Because ad load has steadily increased since Facebook started running ads, it’s little surprise that they have finally reached a point where a slowdown is necessary to manage capacity. (Chrome users: download the Facebook Ad Spotter extension to see the ratio of ads-to-organic posts in your own News Feed).
Citing basic supply and demand reasoning, there has been widespread concern from Facebook advertisers that costs will spike as the number of advertisers grow and as existing advertisers scale their spend with Facebook.
Facebook’s total advertising revenue has consistently risen 50% yearly for the last 5 years, and their guidance for 2017 shows a 35-40% growth. Based on the impacts of the relevant factors detailed below, the only downward pressure on Facebook revenue will be the decrease in ad load growth.
Facebook still is and will remain, one of the best platforms for direct response advertising. Here’s a breakdown of the six reasons that you shouldn’t stress over the slowdown.
(1) Time On Site
When it comes to the average time a user spends on its site, Facebook has seen a consistent increase of 10% or more year-over-year (YOY).
This means that even if the ratio of ads consumers see starts to slow, the total number of ads they see will eventually increase as the total number of posts increase (since more time on the site usually equals more posts).
(2) User Growth
Facebook’s user growth remains strong with the total number of worldwide Daily Active Users (DAU) continuing to see double-digit growth.
In the US alone, DAU was up more than 5% YoY for the first quarter of 2017. More users mean more ad supply and increased targeting abilities as more of your niche customers become available.
For our own clients, we’ve seen their share of spend for Instagram double from the first quarter of 2016 to the first quarter of 2017. There’s additional opportunity for growth with current data showing around 2 billion Monthly Active Users (MAU) on Facebook and 700 million MAU on Instagram with no doubt that those numbers will only continue to rise.
(4) Facebook Ad Network (FAN)
There has also been an increase in the volume on Facebook’s native advertising in-app placements (otherwise known as FAN). This volume has more than tripled YoY, and we expect it to keep rising.
This means FAN is a great testing ground if you’re concerned about Facebook’s ad load slowdown. CPC’s here are roughly 90% cheaper than Mobile News Feed, and despite a slightly lower conversion rate than the Mobile News Feed, the price of customer acquisition should remain unchanged as FAN continues to grow.
(5) Ad Targeting Accuracy
Facebook has been pushing advertisers to enable more broad targeting settings and allow their ever-improving algorithms to go after the right customers.
Many of our clients have seen significant success when targeting across news feeds, Instagram, and FAN as part of one single campaign.
And as targeting continues to improve, even with some increase in costs, companies should not be wary of higher pricing because their ads will be reaching more high-intent consumers.
This effect will only continue, but because targeting continues to improve, the supply and demand impacts won’t cause any serious spikes in pricing.
(6) Ad Changes
Each new ad unit introduced by Facebook continues to have a more organic feel. This is important because users are more likely to engage with posts when they look less like ads. Some of the latest ad units released have done just that.
- Collection Ads -The ad shows up in users’ News Feeds and leads with a video or image, followed by four related product images below. You might’ve seen this in the wild already.If someone taps on the ad, it can open up a broader catalog of up to 50 different products. Then if they tap on a specific product, they’ll go to your website or app to make the purchase.It’s the evolution of the Dynamic Product Ads that have been so successful for our clients throughout Facebook.
- Video Ads – Our clients have also seen phenomenal results using videos longer than the traditional 15-30 second Direct Response focused ones. In fact, the best performing videos show the value of the brand rather than pushing value props.This shift in video messaging gives the user more context on their product or service.In turn, this benefits a brand because if the consumer does click through to the website, they already know some basic information and end up spending less time on site researching and more time converting.
So what’s the point of all this?
Facebook advertising has become increasingly more competitive simply because it’s been so successful for a wide swath of businesses across a variety of verticals.
But this slowdown shouldn’t cause you to lose sleep. While some costs may rise, these growing pains from Facebook should in fact position your brand in front of higher quality customers in the long run.
And who doesn’t want that?