Sunday 21 October 2018

John McGee: Facebook money-making machine even more powerful as it ramps up revenue

'In case you missed it, Facebook's Q3 revenues amounted to a staggering $10.3bn, a 47pc increase on the comparable figure in 2016.' Stock photo
'In case you missed it, Facebook's Q3 revenues amounted to a staggering $10.3bn, a 47pc increase on the comparable figure in 2016.' Stock photo

John McGee

Anyone who followed the recent grilling of senior Facebook executives by the US Senate Judiciary Committee can be forgiven for feeling a bit queasy and perhaps outraged that the online platform was used by Russian intermediaries to influence the outcome of the 2016 US Presidential election.

Although these Russian operatives, who were working for the Russian Internet Research Agency, may have only spent in the order of $100,000 on around 3,300 carefully targeted, divisive and misleading ads and posts, they were seen by around 126 million Americans.

But this may only be the tip of a very large iceberg given the number of fake news websites that used Facebook to target voters using purely organic means to spread their misinformation.

As Facebook's executives were being grilled about all of this on Capitol Hill, nearly 3,000 miles away in its Menlo Park headquarters, there were high fives all round as the company reported yet another strong performance for the third quarter of 2017.

In case you missed it, Facebook's Q3 revenues amounted to a staggering $10.3bn, a 47pc increase on the comparable figure in 2016. Of this $10.3bn, mobile revenues amounted to a whopping $8.9bn. Net profits, meanwhile, soared to $4.7bn from $2.63bn last year while the number of monthly average users globally rose by 16pc to an incredible 2.07 billion.

With numbers like these, it's hard not to be impressed with the sheer power of the money-making machine that is Facebook. Like the other digital behemoth, Google, the two companies are well on their way to controlling the lion's share of global digital advertising revenues over the coming years.

On the other hand, it's hard not to be concerned about the growing power that Facebook has, not only in terms of the grasp it has on global advertising revenues and the impact this has on mainstream media, but also the power its platform wields. As we have already seen with the Russian controversy, the ability of people, companies, including the occasional fraudster, to game the system and trick its algorithms, unbeknownst to the company, is frightening.

With great power, comes even greater responsibility and whether it likes it or not, Facebook now needs to step up to the plate and demonstrate to both legislators - and its 2.07 billion users - that it takes this responsibility very seriously.

Facebook's money-making capability is obviously rooted in the sheer size of this user base. In its most recent set of results, for example, it noted that the average daily revenue attributable to each of its users amounted to $7.54.

When you have that many eyeballs, it makes for a compelling platform for advertisers. Indeed, Sheryl Sandberg, Facebook's COO, noted that the company had six million paying advertisers at the end of Q3. If Facebook as an advertising platform wasn't working for them, it wouldn't be making the kind of money it is now.

Most of us probably know of a restaurant, a football club, a media outlet, a pub, a charity or a local community group that has a Facebook page. Many of them use it as a way of engaging with existing and potential customers, letting people know of local developments or simply driving traffic to their own websites.

This is where Facebook really comes into its own, a point raised by Louise O'Donnell, the Sligo-based social media expert and trainer who has just published a new book called Facebook Marketing: The Essential Guide for Irish Organisations (Liffey Press, €16.95)

It's a practical and useful guide for any brand or organisation looking to harness the enormous power of Facebook.

O'Donnell takes readers on an informative step-by-step journey from setting up a company page and setting expectations right through to customer analysis and insights, content creation, case-studies in addition to a primer on the all-important Facebook advertising platform that keeps cranking out those dollar bills for the company.

Like Google's advertising platform, if you don't know your way around it and how to correctly target potential customers, you can easily end up throwing money into an enormous black hole and your entire marketing efforts will have been in vain.

Notwithstanding low click-through rates that average out at around 0.9pc, Facebook advertising can also be expensive. When it announced those Q3 results two weeks ago, buried deep down in the earnings statement was a note the said that the average cost per ad had increased by 34pc, a clear indication that the stakes are high in what has become a pay-to-play social media ecosystem.

These spiralling costs might put some small firms off advertising on the platform but there are also many SMEs out there that will testify that Facebook advertising, when managed effectively, actually works.

But for those that don't advertise, however, it still offers a powerful platform from which they can still keep in touch with their customers, followers and friends.

Just don't expect it to add to the bottom line.

Sunday Indo Business

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