Facebook Ads (No, Not The Ones You Think Of) And What It Means For The Future Of The Company

Outdoor ad in Cologne, Germany

Here’s something I didn’t expect to see. Facebook ads. Ads from Facebook.

What, if anything, do these ads tell us about the future prospects of Facebook? Let me suggest three possible answers:

1. The bear case. Facebook’s user growth is slowing down, and usage has dropped. The ads will improve the numbers, but only in the short term. Users are losing interest(1). There are too many ads and too many other apps. This is the beginning of the end.

2. The bull case. Facebook has grown organically to 2 billion MAUs (which is insanely impressive!). As the company matures, they will need to find new ways of fueling growth. Ads in the logical next step, and will be used to bring the next billion users onto the platform. The future is bright.

3. It’s the Germans. Germans are known for being somewhat obsessed about privacy and data collection(2). So it’s no surprise that many of the ads focused on the fact that you can control who sees the content you share. The ads are an exception, needed only to assure the wary Germans.

I think it’s a combination of all three. Maybe 50% #3, 30% #2 and 20% #1.

But whatever the reason, I’m still bullish on Facebook. Here’s why:

As a user I love Facebook. Four of the company’s apps are on my phone’s home screen. I use them every day, and I expect that to be true a year or two from now. Network effects are the economies of scale of the 21st century, and Facebook has the biggest network.

As a marketer I love Facebook. Facebook offers unparalleled scale, the world’s best targeting capabilities and ad products that are years ahead of the competition. As the digital advertising pie continues to grow, so will Facebook’s share of it.

As a (small) shareholder I love Facebook. I’m continuously impressed by how well-run the company is. The switch to mobile was masterful. The Instagram acquisition was brilliant. Mark and Sheryl are truly world-class operators.

Thanks for your 2 minutes!


Sources

(1) http://www.telegraph.co.uk/technology/2016/06/07/people-are-getting-bored-of-facebook-and-instagram-study-says/

(2) https://www.usnews.com/news/best-countries/articles/2016-04-05/germanys-cryptic-debate-on-data-and-privacy