On October 30, Facebook released their Q3 earnings report. While their revenue was still a casual $13.7 billion (up 33% from Q3 2017), growth has been slowing as compared to previous years.
In his update to investors, Mark Zuckerberg cited nearing “saturation in developed countries” as a possible factor. He also identified three key strategies they’re shifting toward: 1) putting less emphasis on News Feed and more on Stories and messaging, 2) growing Watch and IGTV to compete with YouTube, and 3) improving security in response to increasing threats.
He says 2019 will be a year of increased investment in those new experiences, implying continued slowed revenue growth while they figure out how to best monetize those platforms.
Here, we’ll cover the main highlights from the report and dive into what these updates mean for martech.
They’re now measuring (as of last quarter) people who use any of their apps (WhatsApp, Instagram, Messenger, Facebook) rather than just those on Facebook, for a better representation of their community. This also obviously aligns with their overall shift toward messaging and storytelling.
While earnings reports are more immediately concerning to investors, marketers also obviously have stake in the game — they provided almost all of that $13.7 billion Q3 revenue stream in advertising.
1. Continued emphasis on storytelling
People now share more than 1 billion stories every day.
On his reason for investing in stories, Zuckerberg stated, “I just think that this is the future. People want to share in ways that don’t stick around permanently and I want to make sure that we fully embraced this.”
He noted that while Instagram Stories and WhatsApp Status took off immediately, Facebook Stories has been much slower, with the transition from News Feed-first to stories-first not having been “as smooth as he’d hoped.”
2. Figuring out new ad platforms
Much of Facebook’s slowed revenue has been still being in the stages of product development and figuring out how to monetize those platforms.
Zuckerberg said, “We’re following our normal playbook here of building out the best consumer products first and focusing on succeeding there before ramping up ads. I’m optimistic that we’ll get ads in stories to perform as well as feed over time, and that the opportunity will be even bigger because it looks like stories will be a bigger medium than feed has been.”
It looks like the future will hold ads in Facebook Stories, Instagram Stories, Instagram Explore, and potentially Messenger and WhatsApp.
They’ll begin with two products: paid messaging and ads in stories. “By making businesses pay to send messages,” Zuckerberg said, “we believe it will make them more selective with what they send.” More updates will come on these in the next few quarters.
3. Public feed to private messages
People share more photos, videos, and links on WhatsApp and Messenger than they do on social networks.
In the future, businesses may need to advertise and sell directly on WhatsApp and Messenger. There are already more than 3 million accounts on WhatsApp Business.
This will be a change from prioritizing Facebook posts to more time in personal, private interactions.
4. Emphasis on Instagram to Explore, IGTV, and new shopping experiences
For Instagram, on the other hand, they plan to focus less on communities and more on helping users explore interests — which means IGTV, shopping, and Explore.
Zuckerberg stated, “Explore is already about 20% of the time people spend in Instagram. But unlike feed, we haven’t built any ads experience for it yet, so that’s an opportunity.”
5. Knowing which messaging platforms work best in which countries
In the US, iMessage is ahead of WhatsApp/Messenger. In other countries, including many in Europe and Latin America, Facebook’s products stand ahead.
6. More focus to video
According to Zuckerberg, “Video is a critical part of the future, it’s what our community wants, and as long as we can make it social I think it will end up being a large part of our business as well.”
The business challenge of video is that “it monetizes significantly less well per minute than people interacting in feeds.” Facebook acknowledged that as video grows, it will likely displace some other more profitable services. However, they still believe it is the future, providing more engaging content.
7. Continued concerns of privacy and safety
Zuckerberg cited this as a key challenge facing Facebook. Their data breach earlier this year was one of the worst we’ve seen, not to mention many accusations of hate speech, election interference, and fake news.
They’ve pledged to hire thousands more people to combat these threats. They’ve also added an election “war room” to promote integrity of information around elections.
Much of Facebook’s future revenue growth depends on us — on marketers — and how comfortable we feel using and spending on new advertising platforms.
For now, investors seem to be confident despite slowing growth:Facebook shares rose by 6.4% on Wednesday, the biggest one-day gain since April.
Despite the hype over “slowing growth,” the reality is they’re still at 33% YoY, a rate most companies only dream of. No one would expect their wild growth of previous years to last forever — it’s just a matter of when the slowdown would happen and how they’ll innovate to keep the business thriving.