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Facebook nears peak ad load

News, 29 July 2016

MENLO PARK, CA: Facebook, the social network, anticipates that ad loads on its platform will be nearing a peak level by the middle of next year, but remains optimistic about fuelling revenue growth in other ways.

The firm's ad revenue rose by 63% to $6.2bn in the last quarter, with mobile taking 84% of this total. But David Wehner, Facebook's Chief Financial Officer, suggested ad loads will soon reach a peak, with a likely impact on future growth.

"Advertiser demand: that was particularly strong this period. And then also we matched that with supply. And the supply – the two big drivers are user time spent, and then ad load," he said on a conference call.

"We think we're in a good zone on the right ad load, and we do think there's opportunities to grow that modestly. But as we look forward into 2017, we think it'll be a less significant factor driving inventory growth."

Expanding further, he reported that ad loads were "definitely up from where we were a few years ago", and should reach the maximum level in just a few months.

"We anticipate ad load on Facebook will continue to grow modestly over the next 12 months, and then will be a less significant factor driving revenue growth after mid-2017," Wehner said.

"Since ad load has been one of the important factors in our recent strong period of revenue growth, we expect the rate at which we are able to grow revenue will be impacted accordingly," he added.

Finding the correct balance of ads and content on Facebook's pages, Wehner asserted, is a "mix of art and science" that seeks to serve the interests of brands and consumers alike.

"We also want to be thoughtful about making sure that each person's overall feed experience has the right balance of organic and ad content. And that factors into how we think about ad load and where that might ultimately be," he said.

"Really, I think one of the things that's enabled us to grow ad load has been improving the quality and the relevance of the ads … And we've been be able to do that without negatively impacting the user experience."

And while fewer opportunities may exist to boost revenue through enhancing the number of ads, Facebook is confident that further expansion of its audience, coupled with better tools for marketers, can achieve the same goal.

"I don't think we would think about necessarily dropping ad load to drive pricing," Wehner said. "We still see the opportunity to grow inventory from the growth of people and engagement on Facebook.

"We're also very cognizant of providing good value to advertisers, and getting that balance right is important to driving overall ROI, as well as obviously providing better targeting and measurement tools for our advertisers."

Data sourced from Seeking Alpha; additional content by Warc staff