Facebook’s Booming Ad Business Is Only Getting Bigger

Every six months, the Interactive Advertising Bureau (IAB) publishes a revenue report on the state of the digital ad industry. In its most recent edition, social media revenue rose to $7 billion, a staggering 57 percent increase from the same period a year earlier. Social media revenue has climbed in every report since the IAB began including such data in 2012.

To no one’s surprise, Facebook drove the majority of that growth. According to eMarketer, Facebook accounted for 68 percent of all social media ad spend in 2016. Along with Google, the two tech giants made up 90 cents of every new dollar spent on domestic digital advertising during Q1 2016, per media trade group Digital Content Next.

It’s clear that ad professionals aren’t expecting Facebook’s grip to loosen any time soon.

In the past year alone, Facebook added two million monthly advertisers, expanding its total to 5 million. While larger brands still comprise the brunt of its ad revenue, small and midsize companies, especially in the e-commerce and retail sectors, are turning to the social network for its native shopping tools and external linking capabilities.

Perhaps what’s most impressive is that even with this continued expansion, Facebook’s ad platform remains untapped by the vast majority of its business portfolio. Those 5 million brands paying to advertise on the site account for only 8 percent of the 65 million businesses with Facebook profiles. A small fraction of advertisers may view Facebook as irrelevant, but the platform will keep aiming to change that with measures that improve mobile usability. Mobile advertising makes up 84 percent of its ad revenue, and through new tools and an updated Ads Manager app, the social giant is positioning itself to dominate the mobile market for years to come.

Further aiding Facebook’s growth potential are recent moves to revamp its video marketing model and compensate publishers. Digital video revenue on smartphones and tablets rose to $1.6 billion in the first half of 2016, a 178 percent growth over the previous year. And according to a study conducted by Advertiser Perceptions on behalf of Trusted Media Brands, “65 percent of media executives say social media is the most important platform for digital video advertising.”

Now that Facebook is sharing revenue with media partners, it’s a more attractive option than ever for companies looking to monetize their content. Facebook’s ad business is already lapping the competition, and that gap is about to widen.