Revenue growth is decelerating at Facebook. The company has saturated most developed markets, and to continue increasing its active user base, the social network must push further into low-income regions with fewer dollars for advertising. To stem the tide, Facebook wants to forge into the already crowded video business in an attempt to steal ad dollars from TV and YouTube!. Miriam Gottfried reports at The Wall Street Journal:
The trend explains why the company, with its shares fetching a still-rich 32 times 2017 earnings estimates, is pushing aggressively into video as the next frontier. Facebook said in November that ad-revenue growth would slow “meaningfully” after mid-2017, as its ability to cram more ads into users’ feeds wanes. It also said spending would ramp up significantly this year. The company already dominates the digital advertising market, along with Alphabet’s Google. To achieve its next leg of growth, it must win over ad dollars from TV.
Facebook has been promoting its live-streaming capabilities and is testing a new video-ad format that would insert ads into the middle of live videos. The company is also developing a video-centric app for TV set-top boxes and is discussing licensing long-form TV-style programming from media companies, The Wall Street Journal reported. But Facebook faces stiff competition for content and viewing hours from traditional TV and more established video-streaming platforms.
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Jeremy Jones, CFA
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