Facebook Struggles with the Future of Digital Ads Despite Massive Revenue

This is a continuation of our ongoing series investigating unblockable online advertising. Last week we took a look at Twitch.tv’s successful attempt to rework their site to support unblockable ads, and this week will be examining Facebook, the challenges they face, and their less-than-successful attempts to circumvent adblockers.

Facebook boasts a tremendous number of active users, surpassing 1.86 billion in the 4th quarter of 2016. A recent article from TechCrunch (linked at the end of this piece) states that Facebook earned $8.81 billion in revenue in Q4 2016, vastly exceeding analyst estimates. Despite this tremendous success, Facebook has warned that they believe their revenue growth will slow down significantly by the middle of 2017, as they are rapidly running out of ad space that can be used without completely ruining the user experience on their site. TechCrunch examined the numerous factors that affect Facebook’s advertising revenue, and their plans to create “sustainable ad revenue” while retaining usability.

TechCrunch noted that Facebook earns nearly $20 per user every year, but it remains to be seen whether this is truly the maximum advertising revenue they are capable of squeezing out of their users. The allegations of spreading “fake news” that were leveled against Facebook following the 2016 presidential election cycle have forced Facebook to reevaluate what they allow advertisers to post in an attempt to diminish the profitability of this practice. Facebook also attempted to roll out unblockable ads in 2016, which was met with brief success. After approximately 48 hours, adblockers had figured out the changes Facebook had made, and determined away to filter out the new ads.

Despite mixed results, it seems unlikely that Facebook will be entirely put off of the idea of serving unblockable ads. While their success may have only been temporary, the brief but significant revenue spike discussed in the first part of this series seems to indicate that this is not an avenue that Facebook will be willing to abandon quite so quickly.

Only time will tell if Facebook is dedicated to serving ads to as many users as possible, or if they have indeed been discouraged by the nearly instant response on the part of adblocking software. Given that Facebook is expecting to have reached a saturation point with regard to their ad space by the middle of this year, it seems like the next logical step would be expanding and reworking their system to ensure that ads are being delivered to all users in order to maximize revenue.

Overall, Facebook finds itself faced with some unprecedented challenges, both with attempting to cull fake news while retaining ad revenue, and attempting to squeeze out as much profit from users as possible while already utilizing as much ad space as they have available. Anyone seeking further details on the revenue Facebook has recently generated through advertising is encouraged to read this excellent article, and I encourage our readers to keep their eyes peeled for Facebook in the headlines as 2017 progresses.

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