Facebook bets that Stories are the future, and ads will follow

Ed note: This article has been updated from an earlier version. Facebook is betting the future of the social network on Stories, which could wind up being good news for Snapchat. Last week, Facebook CEO Mark Zuckerberg said that Stories, now available on all its properties—Instagram, WhatsApp, Messenger and the main social network—is the future of social media advertising. That means the company will train advertisers to think beyond News Feed ads, the posts that appear in the main stream of content of Facebook and Instagram, and learn to create vertical video ads that fit Stories. "I'm optimistic that we'll get ads in Stories to perform as well as Feed over time," Zuckerberg said last week during a call with analysts after Facebook released its quarterly earnings. "And that the opportunity will be even bigger because it looks like Stories will be a bigger medium than Feed has been." Originated by rival platform Snapchat, Stories are optimally suited for mobile: They play vertically and they disappear in 24 hours, so there's no permanent record. Facebook first copied Stories from Snapchat in 2016, introducing them to Instagram, and recevied some public ribbing for co-opting the feature. But now this imitation could become the sincerest form of charity: With the world's largest social media company all in on the format, it could be Snapchat's turn to take cues from Facebook. "If Facebook is successful in developing new ad products for Stories," says Brian Wieser, senior analyst at Pivotal Research, "they could come up with an innovation that Snapchat could borrow, if not outright plagiarize." Until now, Facebook's aggressive push into Snapchat's space has mostly threatened the younger company. Facebook has a far larger footprint and better inroads with advertisers, and also has the more developed technology to manage the growth of Stories, using its rich consumer data to serve the best content to the most relevant consumers. That's a trick that Snapchat is still trying to master with its less mature platform. "Facebook and Instagram have used the clever Stories format to keep their platform fresh mostly at the expense of Snap," says Scott Symonds, managing director of AKQA Media. "Perhaps the bright side for Snap will be the fact that advertisers will be producing more Stories-format ads, which should make it easier to include Snap in buys." Facebook says there are one billion Stories created across its family of apps every day, with 400 million people viewing them on Instagram, 450 million on WhatsApp and 300 million on Facebook and Messenger combined. They have been slower to take off on Facebook than the company had hoped, Zuckerberg said. Snapchat, by comparison, has 186 million daily users. Snapchat declined to comment for this story. The transition to Stories could actually hurt Facebook's advertising prospects in the short term, Zuckerberg said, because there are fewer advertisers buying them and the ads cost less than the ones in News Feed. Facebook reported ad sales grew 33 percent year over year to $13.5 billion in its third-quarter earnings report. But during the same period in 2017, ad revenue grew 49 percent year over year. In its third quarter, Snapchat hit $298 million in ad revenue, a 42 percent jump year over year. Snapchat has had a similar problem trying to grow its company since taking it public last year. The company had to educate advertisers on the then-new way of shooting videos vertically for phones, and it had to sell the market on a mostly untested concept. "As more people use Stories, we think [advertisers] will increasingly feel comfortable in Stories," said Sheryl Sandberg, Facebook's COO, in the company's call with analysts. "But we have a long road ahead of us—even with tools that make it easy—to drive awareness and adoption. We think once we do, the returns will be good."

Facebook bets that Stories are the future, and ads will follow

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