Advertisers are still pumping money into Facebook, even as the company is under fire over growing security and data concerns

January 31, 2019

Advertisers are still pumping money into Facebook, even as the company is under fire over growing security and data concerns

Mark Zuckerberg

2018 was a rough year for Facebook with a number of scandals about how the company handles data and privacy.
Facebook execs spoke during the company’s fourth-quarter earnings call about how the social media giant is cleaning up its platform.
Despite the concerns, Facebook’s ad business continues to soar, with revenue rising 37% to $56 billion in revenue in 2018.
Facebook reported having 7 million active advertisers, up from 6 million last year.

Despite numerous scandals around security and data, Facebook continues to soar.

During fourth-quarter earnings, the social network reported $55.8 billion in 2018 revenue, up 37% from 2017. During the fourth-quarter — when advertisers tend to spend the most of their yearly budgets around the holidays — Facebook netted $16.9 billion, beating Wall Street’s expectation of $16.4 billion.

"We know we still have a lot of hard work ahead of us — we need to do better at anticipating the risks that come from connecting so many people," Facebook COO Sheryl Sandberg said during the earnings call. "We need to earn back peoples' trust."

Small and midsize businesses make up the bulk of Facebook’s advertisers, and the number of marketers on the platform continues to grow. Facebook now has seven million active advertisers, up from 6 million in 2017.

Instagram holds a lot of advertising potential

Execs continued to stress that Facebook's news feed is maxing out on ad load and prices, making Instagram the company’s big bet on future advertising growth.

"On the supply front, we benefitted from strong Instagram growth, which was aided by both growth in impressions on Instagram feed and Stories," said Facebook chief finance officer David Wehner. Similar to recent past quarters, Wehner advised investors that Facebook's ad growth rate will slow down and will be reflected in first-quarter earnings this year.

Facebook's Stories product in particular holds a lot of promise and represent Facebook's attempt to create one ad unit that can run across Facebook, Instagram and WhatsApp.

According to Facebook, 500 million people use Stories every day, and 2 million advertisers run ads on Stories.

However, advertisers haven’t completely shifted to Stories and continue to see prices for news feed ads go up.

Advertisers have struggled to create vertical-oriented content that's required by the Stories format, as opposed to horizontal ads that are suited to the news feed. Sandberg noted that the company began offering technology last fall that converts news feed ads for the Stories format.

When asked by an analyst during the earnings call about the performance of Stories ads and if the pricing gap between news feed and Stories ads is narrowing, Sandberg said: "There's a benefit to being an early adopter, so the pricing is really attractive — we think the shift to Stories is a big opportunity for us, and it's going to take time to get advertisers in."

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