Why Facebook’s Advertiser Metric Is a Big Deal
Risk of advertiser loss
Regardless of whether Facebook (FB) posts top line growth in the coming 1Q17 report on May 3, 2017, investor attention would still be on the company’s active subscriber metric. The company is facing a growing competitive threat from Snap (SNAP), Amazon (AMZN), Yelp (YELP), and Alphabet’s (GOOGL) Google.
In its most recent update, Facebook noted that it has more than 5 million active advertisers—a sharp increase from ~1 million active advertisers in 2013, according to Business Insider. Are Facebook’s advertiser gains accelerating or slowing? Investors should be looking for answers to this question when the company releases its 1Q17 earnings.
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Can Instagram be Facebook’s saving grace?
Instagram, a Facebook company, reported in March 2017 that it had reached 1.0 million monthly active advertisers, implying an ~400% gain from March 2016. Instagram is Facebook’s answer to threats like Snap and Yelp, and investors would want to see more such growth on Instagram and Messenger. This growth would give Facebook a chance to stand up to the competition.
Instagram has 600 million monthly active users, compared to ~1.9 billion monthly active users on Facebook’s flagship app. Facebook reached the milestone of 1.0 million active advertisers when it had 820 million users, indicating that Instagram is gaining advertisers more rapidly. The chart above shows how Instagram’s subscriber base has trended in the past few years.
User engagement as a growth catalyst
Facebook recently introduced new features on Instagram, Messenger, and its flagship app to improve user engagement on its platforms. Advertisers are attracted to social sites that have strong user engagement.