With ad load reaching capacity, Facebook has to find new sources for mobile growth. Luckily, they already have one.
In November 2016, Facebook projected it will hit its limit in newsfeed ads by the middle of 2017. It is a self imposed limit. They don't want to ruin UX by chasing ad revenue growth - the rapidly growing reach of ad blockers, even on mobile devices, is testament to how irritating users find online ads. The company warned that being unable to put more ads in front of users will, quite naturally, lead to a slowdown in revenue.
Yesterday's Q1 2017 revenue report once again came with warnings to investors about the limits to ad revenue growth.
"Facebook Inc shares dipped from a record high on Wednesday after the world’s biggest online social network warned investors once again that its advertising revenue growth would likely come down from current high levels.
The warning appeared to outweigh Facebook’s surging quarterly profit and revenue, fueled by growth in its mobile ad business, which is still not showing much sign of slowing down as the company nears the five-year anniversary of its initial public offering."
It is worth remembering that Instagram contributes to Facebook's bottom line.
As advertisers hit Facebook's limit, they can simply switch to Instagram and maintain their relationship. A lot of them already have. Instagram recently surpassed 1 million active advertisers, double what they had six months before, and look set to record huge ad revenue growth in 2017.
Looking at the recent download data, there is no obvious cause for concern.
On Google Play Store:
In the last six months (including Q1 2017) Facebook has maintained a steady lead. Instagram had one scare from Snapchat but, as I have written about before, Snapchat just isn't in the same league when it comes to pure volume of users and downloads.
On the App Store:
The picture is a little messier.
First of all, it's worth highlighting that the overall scale here is much smaller. None of the three apps went over 600,000 daily downloads in the last six months while, on Google Play Store during the same time span, Facebook has never gone under 1 million.
That being said, the three are much more closely matched but, again, Snapchat doesn't come out on top for very long. Those peaks are only a day or two at a time.
The picture becomes clearer when the data is sorted by month.
Snapchat have come on a little in the last six months but it is Instagram who have taken Facebook's download mantle. Which means that Instagram's prospective growth in ad revenue looks an even stronger bet for the rest of the year.
Even when Facebook loses, Facebook wins.
If Facebook isn't cool, we don't want to be cool
For the several years now, Facebook has found itself put under pressure over its perceived decline in popularity with younger users. The argument goes, now parents and grandparents are on Facebook, teens are looking for other social networks to spend time on. Other, newer networks like Snapchat or Whisper or, before Facebook acquired it, Instagram. This narrative comes from a semi-annual survey by Piper Jaffray which asks teens to rank social media sites in terms of how important they consider them.
Every time the answer comes back 'something other than Facebook' the media dutifully trumpet the results. In 2014 it was all about Instagram. By 2015, Snapchat was the new coolest kid in school. Last year teens had given up on social media altogether and gone back to messaging apps like Whatsapp. Now, in 2017, Facebook is completely passé as far as young users are concerned.
Or so they claim.
There is some much, much more compelling evidence to the contrary (HT Recode).
If engagement is the lodestar of online metrics, Facebook is in a league of its own. Not only does nearly every 18-34 year old have it, but they spend 250% more time on it than those 'cooler' competitors. Any investors worried about engagement figures should pay more attention to hard data like this rather than opinion surveys.