Facebook

Facebook

24 April 2017Reading time: 5 minutes

Facebook is currently one of the most popular social media platforms in the world. It seems that the growth potential has not yet reached its limits, however this also has pushed up the share price. 

 

Recently the media specialist Zenith expressed the expectation that in 2017, advertisers worldwide will spend more advertisement budget on internet ads instead of television for the first time in history. While 34% of the total advertisement budget was spend on internet ads in 2016, this percentage is expected to increase to 36.9% in 2017. According to Zenith the total online ad market will grow this year with 13% to USD 205 billion. The total spend television budget will probably not pass the amount of USD 192 billion at the end of this year.

 

Research company eMarketer expects that the American ad market will grow with 15.9% to USD 83 billion in 2017. This growth will probably be dominated by Google and Facebook. For example, eMarketer expects for Facebook to realize a growth of 32.1% in 2017 and because of that enlarge its market share on the ad market from 35.4% to 39.1%. Google will come as second with a market share of 12.5%. For the following years after 2017, eMarketer expects that Facebook’s market share will grow on even further to 43.7% in 2019.

 

One of the growth drivers is that Facebook succeeds to bind their users for a longer period of time thanks to video. However at the same time Facebook is struggling with users getting tired off all the ads, leaving no more room for more ads without losing user interaction.

 

At the same time Facebook has to deal with increasing competition from especially Snapchat, which is particularly popular amongst the youth. Recently Snap Inc, which is the mother company of Snapchat, made its debut on the stock exchange to secure future growth. Over the past year the number of daily users of Snapchat grew with 46% to 161 million.

 

Because of these developments Facebook wants to focus more on the revenue growth of Instagram, which they bought in 2012 for USD 1 billion. At the end of 2016 Instagram had more than 600 million users, while the number of advertisers grew from 200.000 to 1 million. On average analysts expect that the turnover of Facebook will increase with more than 37% to USD 37.9 billion in 2017, where Instagram will represent 20% of the total turnover. However this is also where the biggest danger lurks, because Facebook mostly depends on the advertising revenues which is realized through their own platforms.

 

Only a small part of the revenue is realized by the Facebook Audience Network. Online publishers can offer space on their websites and apps where advertisers can bid on through the Facebook adds network. Amazon.com has developed a system for this network which they want to unroll on a large scale, which is why Facebook has recently start a cooperation with Amazon.

 

Another danger for Facebook is that advertisers can withdraw because of the upswing of fake news and controversial content. This is something Google recently experienced with their online video platform YouTube. After large companies such as Mark & Spencer, HSBC and McDonald’s had stopped their ad campaigns on YouTube, other companies like L’Oreal and Volkswagen also cut back on their advertising budgets for the videoplatform. By now Facebook has taken precautions to deal with fake news by showing warning messages and using fact checkers. It remains to be seen if these precautions will be effective enough to prevent advertisers from leaving. Meanwhile Facebook is developing consumer electronics behind the scenes according to insiders. This would make it even easier for users to communicate with each other through Facebook’s online platforms. Facebook itself has not yet spoken about this, but they do have several vacancies available for engineers and technicians who want to work on ‘ground breaking products’. This may be related to the Virtual Reality gear of Oculus Rift, the company which Facebook bought in 2014 for USD 2 billion. Currently Facebook is being traded at an all-time high and the market value is now more than USD 400 billion. The growth expectations for the next years are strong, although problems such as fake news can pressurize it when advertisers decide to cut back on their budgets.

 

 



At the moment Vontobel do not offer short products on Facebook.

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18/10/2019 16:08:53