When Facebook prepared to go public five years ago, its plan to boost its then minuscule mobile revenue was to put adverts in users' newsfeeds. Cautious about putting people off using the app, it promised just one ad per user per day.
Fast forward to the fourth quarter of 2016, the newsfeed plan has paid off. Mobile contributed 84 per cent of revenue, which itself grew 51 per cent to $8.8bn, resulting in net income of $3.5bn for the fourth quarter. The company has 1.9bn users, with 1.2bn logging on every day.
Facebook has become less cautious about newsfeed — with users seeing far more than one ad per day — but it now believes it will finally have to stop adding more by the middle of 2017 .
It has plenty of options to continue increasing revenue: win new users, which it did at 17 per cent year-on-year though many from Asia and other areas which spend less on digital advertising, increase the time users spend on the platform, and get more marketers to buy more ads.
But it is also on the hunt for a new newsfeed, an area in Facebook's family of apps where it can put more ads. David Wehner, chief financial officer, said there was a "bunch of places" where they could increase ad impressions.
"When you look at the texture of the business today, the bulk of the revenue and growth coming from Facebook, with Instagram increasingly making a contribution, and we're experimenting with other services," he said.
Mark Zuckerberg, Facebook founder and chief executive, believes the app's future is in putting video first — and so Facebook has created a new tab away from the newsfeed just for video. This shows both user-generated short videos and professional content, which may get longer as the business model gets stronger, he said.
"Video is a megatrend on the same order as mobil e," he said.
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Facebook is now testing "mid-roll" ads in videos, such as advert breaks on TV, including in livestreams. Sheryl Sandberg, Facebook's chief operating officer, said this is in the "early experimental stage" and the company is working with marketers to help them learn how to make better video ads.
Instagram has already been contributing significantly to Facebook's top line, with research firm eMarketer estimating it will generate $3.64 bn in revenue this year. Instagram's own newsfeed still has room for more ads, Mr Wehner said, and that, alongside growth in users and the time they spend on the photo app, could increase revenue. It has been quicker than usual to roll out adverts in Instagram stories, the app's Snapchat Stories copycat, where users post collections of photos that last for just 24 hours. After launching last summer, it already has 150m monthly active users.
Debra Aho-Williamson, an analyst with eMarketer, said advertisers like Instagram because it is easy to buy on Facebook — in fact, you have to untick a box so you do not show ads there.
"That's something Snapchat doesn't have and can't really replicate. It is just that much larger than Snapchat's audience and broader. Instagram is heavy on teens and millennials but it also has more Generation X and that is more a ttractive to advertisers not targeting teens," she said.
Facebook is also experimenting with generating revenue from its messaging apps. After working with businesses to build a platform for them to communicate with customers on Facebook Messenger, it is now trialling adverts that appear between threads of messages with friends.
WhatsApp, the SMS-replacement app it bought in 2014 for $22bn, plans to introduce a service for businesses to issue messages such as fraud or delivery alerts to existing customers later this year, though Ms Aho-Williamson suggests that could be delayed by lawsuits in Europe contesting the company's change in its privacy policy.
Joshua March, chief executive of Conversocial, a social customer service company that works with Facebook Messenger, said it was still figuring out how to bring companies into both messaging apps without pushing users to their many rivals.
"The thing everyone is waiting for is when does Facebook see the real monetisation around the messaging platforms," he said. "Almost all of their monetisation is core product and Instagram and they have another 1bn users on messenger and another 1bn on WhatsApp."
While Facebook figures out its nex t newsfeed, Brian Wieser, an analyst at Pivotal, is forecasting that Facebook's revenue growth will slow in 2017, to a 36 per cent increase year-on-year.
But he is not concerned. "The level of growth we are forecasting is still significant considering that the industry is likely to grow at less than half of that pace."
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