Here’s Why A “Review” Feature Can Boost Facebook’s Revenues

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Facebook

Recently, Facebook (NASDAQ:FB), has been prompting users to write a review to share their experience about a place they recently visited and used the platform’s “check-in” feature to inform friends about their visit. This review would then become part of the business page allowing other users to benefit from these positive or negative experiences. As an increasing number of businesses (including small and medium enterprises) use Facebook pages as a promotion tool, a review about their product or service can increase traffic on their page and make Facebook even more relevant for marketing. This can in turn drive advertising revenues for the company. Posting reviews about places on Facebook might become a regular activity for active users who visit the platform multiple times in a day and share experiences. We believe this feature will attract more reviews than on other platforms, given Facebook’s popularity and high engagement level.  As it increases traffic on business pages, it can boost advertising revenues for the company.

.See our complete analysis for Facebook

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Higher Traffic On Business Pages Can Boost Advertising Revenues

Facebook’s check in feature is popular among its 1.55 billion global users and the company even uses this to publish the most checked-in location Facebook (Disney’s properties for 2015). Small businesses encourage visitors to use this feature since it works as a free marketing tool for them, with friends and family being able to see the visited place. Adding reviews for a product or service will make this information more qualitative and promote the business better. Experts believe that reviews on Facebook can be more effective than those on any other platform,  given its high engagement levels and popularity among users. As an increasing number of users post reviews about a business, its Facebook page will see more traffic.  Facebook can become the “go to” platform for users to search reviews of a business or service. This eliminates the need for multiple searches for this information. We believe this can attract more business users to Facebook and encourage them to promote their products and services on the platform. While Facebook has more than 50 million active business pages on its platform, it has only 3 million active advertisers. The company is constantly looking at ways in which businesses can drive more value from their Facebook page, thus converting them into advertisers. According to our estimates, the  Core Facebook Advertising segment accounts for more than 70% of its valuation.  We expect the company’s domestic advertising revenue per user to increase from around $52  in 2016 to nearly $ 80by the end of our forecast period

Higher demand for social media advertising and the roll out of better and more targeted ads will be the key drivers of this growth, according to our estimates.  Businesses can derive more value from their Facebook pages, by providing consumers with a link where they can also see reviews of the product and service offered.  Advertising on Facebook’s platform should increase in tandem.   There can be an upside to our price estimate if this number increases at a faster pace.

Facebook is the undisputed giant of social media. Accordingly, we believe the company’s constant effort to make its platform useful for both users and businesses is the key driving factor for growth. As the company continues to add features to its platform, enhancing its utility for businesses and users, its advertising revenue growth momentum should continue.

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