Facebook $META missed analyst expectations on its second-quarter earnings July 25, and spooked Wall Street with less-than-stellar projections for the future. On its earnings call, the company’s executives set out to assure investors that there are still plenty of growth opportunities, as its stock price tanked in after-hours trading. What this means for users of Facebook’s products is simple: more ads.
The company outlined several ways in which it will boost its advertising revenue, focusing on Instagram and its messaging apps.
“When we think about Instagram, we think we have a great opportunity: 25 million Instagram business profiles, 2 million advertisers,” chief operating officer Sheryl Sandberg said during the call. “We see both anecdotally and in the data that this is a great place for people to become aware of a product in the first place,” she added.
Facebook doesn’t break out Instagram revenue in its financial filings, but analysts see it as an increasingly important part of Facebook’s business. They estimate that it could make up even a quarter of Facebook’s revenue by 2020.
Facebook also wants to add more ads to Instagram Stories, which chief financial officer David Wehner called “an area of continued growth opportunity.” There are currently some ads on Stories, but their monetization is low, which is why Facebook sees it as an area for expansion, especially as more advertisers start to embrace the relatively new format. IGTV, Instagram’s new longform-video product, is ad-free for now, but this will likely change. And companies are already experimenting with using the feature.
The company also has other Story products to exploit, as Sandberg reminded investors:
We have 400 million people sharing with Instagram Stories, 450 million of people with WhatsApp Status. Facebook is newer, but we’re seeing good progress there. The question is will this monetize at the same rate as News Feed? And we honestly don’t know, we’ll have to see what happens. There are good reasons to be very optimistic about the monetization. The opportunity—full-screen authentic, very engaging, different formats than feed—gives us an opportunity to grow.
Facebook also wants to cash in on messaging. Messenger already supports several kinds of ads, most of which are in their infancy: inbox ads; “sponsored messages” which let businesses bug you again and again if you’ve already interacted with them once; and “click-to-Messenger” ads, which redirect you from a News Feed or Instagram ad to a Messenger bot. The company has been experimenting with a similar feature for WhatsApp.
If Facebook seizes all of its “growth opportunities,” get ready to feel more and more stalked by your latest online shoe search on just about any Facebook product.
