Facebook’s Social Ad Spending To Prove Beneficial

Baird claims that Facebook social ad spending will be fruitful for them.

Facebook Inc. flattered its investors earlier in January when it came with its financial results for the fourth trimester FY15 results. During the trade sessions that followed, the stock price of the company accelerated by over 13% which enabled them to go beyond the $100 point. On a year over year (YOY) basis, the company’s revenue grew by 52% to $5.84 billion which beat the consensus estimate accumulative to $5.37 billion. The earnings per share of the company were reported to be 79 cents. According to the behavior of the advertisers recently, it is assumed that the company will repeat the same performance trajectory in the present trimester as well.

Colin Sebastian, the analyst at Baird came up with an updated research note that was sent to investors and clients claiming that the trends of first trimester are extremely promising for the social media giant. It also shows that the scenario is in favor of online advertisements. The report was supported by a meeting with Chris Costello, the Director of Market Research at Kenshoo- a renowned digital marketing agency. Mr. Sebastian noted that the company spending on social and search advertisement as well as paired with the search growth seems to be better than the previous trimester. The Kenshoo customers have also observed an increase of 87% in the social advertisement spending this trimester in contrast to 50% during the months that closed on December 31st.

It needs to be noted here that the analyst is of the view that the social spending is embracing a substantial acceleration in terms of the growth rate. This is merely because of the company’s new advertisement channels and format that can enable the company to beat the estimates made by Street. Mr. Sebastian highlighted that the company has benefited from the evolving demand for the dynamic product advertisements.

The company is disrupting the advertisement world where its platform has become the pivot point for advertisers. This new is actually great for the company as their hold in the market will further strengthen during the present fiscal year. The advertisement industry is evolving and with Facebook gaining momentum in this domain there is a long way to go.

The company is presently catering to almost three million active advertisers. This is almost 50% more than the previous annum as per an announcement made by the company. Mr. Costello highlighted that the dynamic product advertisement’s adoption has increased significantly amongst advertisers which constitutes 8 to 9% of the accumulative social advertisement clicks. This is extremely faster than the conventional mechanism of product listing ads that is within the search fared. According to Mr. Costello, the dynamic product advertisement will enable the company to evolve beyond the app install ads.

Baird has presently given the company an outperform rating with the price target of $120 on Facebook stocks. The company can grow further if they polish their skills more and come up with new intriguing advertisement features in the times to come.

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