Facebook Running Out of Newsfeed Space for Ads

Well, we finally know why Facebook is pushing video so much and it's not just because other companies are doing well with it. It turns out that Facebook is running out of space in the newsfeed to show ads to users, so if they want to keep earning money, they need to expand on where they can show them. It turns out video is a great, interactive way to do that without needing to expand to another app.

Facebook doesn't want to spam users with too many adverts. They want to keep them to a few that people actually want to see and they're close to reaching that maximum. It's not something you would expect to hear and analysts actually had to ask what they meant. This means that they are going to have to start selling more ads elsewhere. The problem is that Facebook is having trouble proving that their ads lead to sales. We all see the ads on there but how often do you click on them? Not very often I expect. Video ad space is going to be more costly so it's going to have to seem worth it to the companies. Facebook have been trying to do that for a while though and it's not going too well. On mobile space, it's very difficult to see how the ads translate and users are also less likely to click on ads as well.

To make ads more attractive there are two things that Facebook needs to do. First, they need to increase their user base so that more companies know they can sell ads on there. They're already doing that and Facebook added 60 million new users last quarter alone. The other thing they need to do is create better ads. That's where Facebook is struggling a little. Their ads need to seem more like TV commercials when they're video and when they're at the side they need to look a little more trustworthy. Luckily Facebook doesn't get their revenue purely through their flagship app but most of it does come from there, so I'm sure they'll figure it out somehow.

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