Facebook advertising could reach saturation point
Facebook Inc.’s platforms feel like a home with too much furniture. It becomes difficult to move.
In addition to the ads in its old Blue app, those on Instagram the company acquired for $ 1 billion in 2012 accounted for about a quarter of Facebook’s total revenue in the 12 months ended September 30, according to consensus estimates by Visible Alpha. The ads on both platforms that make up the bulk of sales now seem to be saturating at exactly the wrong time.
In an increasingly stringent regulatory environment, it seems unlikely that Facebook can simply buy the next Instagram to populate it. This could create growing problems for a mature company that has been steadily increasing its ad impressions over the past five years in an effort to increase overall revenue.
Open Facebook or Instagram before a friend has posted since your last visit, and your news feed could just be a long, vertical banner with sales offers. This experience is by design: According to an analysis of transcripts of several investor calls available on FactSet, Facebook has increased the number of ads placed on its platforms by almost 30% on a quarterly average since the third quarter of 2015.
Interestingly, while ad prices increased on the same basis over this period, prices began to decline in the second half of 2018, with the largest declines occurring this year. For example, in the second quarter, Facebook said that ad prices were down 21% year over year, while ads served were up 40%.