Facebook announced on Friday that advertisements are coming to its Marketplace general classified app. These aren’t paid upsells of items already on Marketplace — at least not for now. Rather, Facebook will take existing News Feed ads and place them inside Marketplace. They’ll look identical to the ads already appearing in News Feed.
The Marketplace ads are just a test for now, so there’s no charge to advertisers and there’s no way for advertisers to buy Marketplace-specific ads. Don’t expect to see your Marketplace stream fill with ads either. “We are starting a small test that shows ads to a small percentage of people using Marketplace in the U.S., and will evaluate the response before determining how we move forward,” Michelle Bonner Techel, product marketing manager at Facebook, said. The website Recode broke the news.
Bringing ads to Marketplace makes sense for Facebook. First, it puts the ads where users are already primed to buy, rather than as a distraction within News Feed. Second, it addresses a problem that Facebook admitted last year threatens to stifle revenue growth: it’s running out of places in News Feed to show people ads.
In the company’s Q2 of FY2016 earnings report, CFO Dave Wehner said that Facebook’s ad load — that is, the total number of ads the company can show to each user — will be a “relative non-factor” for predicting Facebook’s future revenue growth starting in 2017.
In other words, News Feed ads will not lead to greater revenue going forward. Facebook has to be “thoughtful about making sure each person’s overall feed experience has the right balance of organic and ad content,” Wehner said, adding that “the optimal ad load is really a mix of art and science”.
Recode pointed out that Facebook can’t simply count on adding more users as an increasing ad revenue, either. The company already has two billion users in total, and “731 million of the world’s remaining 1.5 billion internet users who are not on Facebook are in China, where Facebook is blocked”.
In that light, demonstrating success from the current ad experiment in Marketplace becomes a lot more critical to Facebook and its shareholders.
In the last six months, paid Facebook ads have been popping up in a lot more places: inside Instagram Stories and Facebook Messenger, and as mid-roll video ads. Facebook also has WhatsApp and Oculus as destinations for ads if it decides to expand in those directions.
Facebook generated close to $27 billion U.S. in total ad revenue in FY2016. EMarketer.com estimated (here) Instagram’s global mobile ad revenue will reach $2.8 billion in FY2017, to account for about 10 percent of parent company Facebook’s global ad revenue.
and that its revenue could grow to as much as $2 billion in the next four years.