Since before Facebook's (NASDAQ: FB) initial public listing in May last year, the company has been questioned over how it intends on increasing revenue received from advertising. Facebook has now answered this question, and users are not happy.
The company has announced that it will be performing a number of major user interface changes to the site to make way for more visual advertisements – both still and moving – to increase advertising by larger companies.
Until now, many larger companies have ignored Facebook as an advertising media due to format and size restrictions. In a recent presentation, Facebook's founder and CEO Mark Zuckerberg admitted that "advertisers want really rich things like big pictures or videos" – a feature which Facebook has not provided historically. Recognising that the News Feed is overwhelmingly dominated by pictures posted by users, the IPO will increase the width of the feature to allow for greater visual display in an attempt to create greater marketing appeal.
Analysts however, are predicting that such a move will conflict with what Facebook users want – the ability to see their Friend's status updates and pictures without too much on-screen clutter. The simplicity to view friends' statuses offered on the Facebook mobile application, for instance, is what attracts users, who do not want to be swamped with auto-playing videos and picture advertisements.
Facebook has recently purchased the Atlas ad server from Microsoft (NASDAQ: MSFT), hoping to provide major advertisers such as McDonald's (NYSE: MCD) and American Express (NYSE: AXP) with key data to help justify their spending.
Foolish takeaway
While the acquisition from Microsoft has the potential to greatly increase Facebook's revenue, an increase in ads will (very) likely be enough to see your friends finally hit the 'Delete' button – perhaps making the switch to rival Twitter instead. Should this happen on a large scale, this would be destructive for the company.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.
