Facebook's big bet on 'Stories' may go even better than its pivot to mobile (FB)

Mark Zuckerberg

  • Instagram
    revenue is being modeled to grow even faster than
    mobile revenues did in the early 2010s.
  • The company is in the midst of a big shift to
    Stories-based sharing, and new financial estimates from Nomura are
    a vote of confidence in its success.
  • Instagram Stories may pull in $7.5 billion in revenue
    for Facebook in 2021, according to the investment

is gambling that the future of sharing on Facebook
lies in ephemeral, auto-deleting photos — and it sounds like the
bet is already starting to pay off.

Over the last year or so, Facebook has leaned heavily into
“Stories”: A sharing format stolen from Snapchat that lets users
post photos and videos that auto-delete after a day. A new research
note from Nomura analyst Mark Kelley suggests that the shift away
from the traditional, scandal-ridden News Feed is going even faster
than expected, and is analogous to Facebook’s shift to mobile in
the early part of the decade that ultimately saw profits boom.

“The transition to Stories is occurring at a much faste rate
than we initially anticipated,” Kelley wrote,  even as “core
Facebook user trends have surprised us to the upside.” He estimates
Instagram Stories alone brought in $750 million in advertising
revenue in 2018 — and is predicting $2.2 billion for 2019, and
$7.5 billion in 2021. 

Facebook began inserting
ads into Instagram Stories in March 2017
, and followed up with
Stories ads
in the core Facebook app in September 2018. 

If Nomura’s numbers prove accurate, the compound annual growth
rate of revenue for Instagram Stories over the next few years will
be even greater than that of Facebook’s mobile revenue between 2013
and 2016. 

facebook nomura instagram revenue predictions stories

Kelley added: “We’ve also heard anecdotally from advertisers
that budgets continue to grow at the corporate level, with spend
being reallocated to Stories rather than Feed, and early feedback
has been positive.”

The vote of confidence will be a welcome piece of good news from
Facebook, which has faced a difficult two years from a public
relations perspective. It has lurched from scandal to scandal —
one month being implicated in the spread of hate speech that fueled
genocide in Myanmar, the next admitting a hack of tens of millions
of users’ sensitive data.

But Nomura suggests that Facebook is now at a point of scandal
fatigue, with crises failing to do much damage: “On the whole, we
do think the negative headwinds have largely been exhausted, with
little reaction to negative press as of yet.”

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Facebook's big bet on 'Stories' may go even better than its pivot to mobile (FB)