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How Portal Could Drive Facebook’s Advertising Business

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Portal conversations stay private

In addition to being a source of non-advertising revenue, Facebook (FB) hopes the Portal device will cover its power advertising business, but hopefully not in ways that will upset Portal users. Facebook is pitching Portal as a video-calling device. It is fitted with auto-tracking cameras that allow users to keep conversations going even as they move around in the room.

Facebook says that the conversations that people have over Portal will always stay private. The company says this means the content of Portal conversations will not be used for advertising.

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Facebook’s ad revenue rose 33%

But Portal is still going to be a useful tool for Facebook’s advertising business. The company hopes to leverage insights gained from how people use Portal to target ads to Portal users across its social networks. For insights that could be used to target ads, Facebook may look into how often Portal owners use a feature or app.

Advertising is Facebook’s primary source of revenue. Advertising revenue increased 33% YoY to $13.5 billion in the third quarter. But growth in the advertising business slowed from 49% a year earlier. Alphabet (GOOGL) and Twitter (TWTR), the other ad-funded companies, grew their advertising sales by 20.3% and 29% YoY in the third quarter, respectively.

Advertisements from partners

While Facebook itself won’t display ads on Portal screens, its partners may do so. Facebook is working with Pandora (P) and Spotify (SPOT) as music partners on Portal, allowing Portal owners to stream music from these providers. Both Pandora and Spotify make money from their free listeners by making them listen to or view ads as they play music.

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