Reportedly, Facebook Inc. (FB) is set to launch a new advertising platform that will improve effectiveness of its online ads. Per reports, the new product will be named Atlas and is rumored to be a revamped version of the Atlas Advertiser Suite business that the company had acquired from Microsoft Corp. (MSFT) in 2013.
The new product is expected to help marketers target Facebook users more effectively by tracking their activities related to ads that appear on the social networking site as well as on other third-party websites and apps.
Moreover, Atlas is also expected to provide an automated ad-buying tool known as a “bidder”, which, in turn will allow other marketers to buy targeted advertising space offered by Facebook. We believe that this move is intended to combat intensifying competition from the likes of Google (GOOGL) and Yahoo (YHOO).
Further, this new platform is expected to widen Facebook’s reach by attracting a larger number of marketers, which in turn will drive ad revenues going forward. Advertising revenues accounted for about 92.1% of total revenue in the second quarter of 2014.
Per Gartner, ad market spending is expected to hit $42.0 billion in 2017, which underscores the prospects of social media giants like Facebook.
We believe that new features like autoplay video and Facebook Audio Network (FAN) will take some time to be accretive to top line growth.
As Facebook’s ad business matures, its top line growth is expected to decline. Facebook’s rapid pace of acquisitions is also expected to weigh down on profitability and cash balance in the near term.
Nevertheless, we believe that Facebook’s growing mobile user base, Instagram’s growing popularity, accretive acquisitions, frequent launch of new and innovative products as well as international expansion will add to the company’s top line going forward.
Currently, Facebook sports a Zacks Rank #1 (Strong Buy).
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