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Facebook Opens Brand New Revenue Stream

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Potential boost to non-advertising business

Facebook’s (FB) Portal device went on sale earlier this month, opening a new revenue stream for the company. The Portal expands Facebook’s non-advertising business, which already consists of the sale of virtual reality headsets and the Workplace corporate networking service. Facebook’s non-advertising revenue increased only 1.0% year-over-year to $188 million in the third quarter, suggesting the business needs a boost. Portal may just be the needed boost.

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With Portal, Facebook has joined the race for the commercial opportunity in the nascent but promising smart speaker market. Globally, households are expected to spend $2.7 billion on smart speaker device purchases in 2018, according to MarketsandMarkets. By the end of 2023, the global smart speaker market is expected to have grown to $11.8 billion.

Diversifying the business

Capturing a piece of the smart speaker market could make a huge difference for Facebook. The company currently relies on advertising for almost all its revenue. However, the digital advertising market is becoming more competitive, raising the need for mostly ad-funded companies like Facebook to try to diversify their operations so as to minimize their risks.

Advertising accounted for 98.5% of total revenue at Facebook in the third quarter compared to 86.1% for Alphabet (GOOGL) and 85.8% for Twitter (TWTR). At Baidu (BIDU), advertising accounted for 82% of revenue in the third quarter.

Portal starts at $199

The Facebook Portal device is available in two versions as Portal and Portal Plus, costing $199 and $349, respectively. The device is competing for market share with Google Home Hub and Amazon’s (AMZN) Echo Show, which cost $149 and $230, respectively.

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