How do you handle the tradeoffs between growth and advertising?

Clarifying Questions:

For which company, we are considering? Facebook

Growth means user growth or revenue growth or engagement growth? User growth

Any specific platform? No

Any geographical location? No

Review the relevant attributes.

a trade-off means that more of one thing necessitates less of another. It occurs due to following reasons.

·         product features may be incompatible. That is, the product that best meets one set of needs performs poorly in addressing others. 

·         Second, there may be trade-offs in activities themselves. In other words, the configuration of activities that best delivers one kind of value cannot equally well deliver another. 

·         Another source of trade-offs is inconsistencies in image or reputation.

Growth: Growth means we are considering userbase growth.

Advertising: Brand or other third parties publish their content on Facebook.

Choose a goal.

Engagement... which is Facebook’s overall goal.  

Evaluation based on criteria and goal:

Engagement: with the increase in Advertisement, Ad revenue grows as long as the userbase stays engaged.

User experience: Short-term play is good with Ad-revenue, in longer-term Facebook will need to continue spending resources in the direction of surfacing more and better ads for the user.

Competition: from competitive perspectives, it is important to introduce advertising for user growth. Without advertisement, Facebook will lose ad revenue but gain new reputation. Reputation doesn’t earn money, so there would be clear thought-out plan on where the revenue goal may be met instead. another important competitor such as snapchat, Telegram shows better engagement, will attract userbase through advertisement.  

Company priorities: Facebook need to increase user base engagement via appropriate advertisement. No ads will lead to a frustration-free user engagement but it may mean less time spent in-app without the distracting ads.

Recommendation:

If we try to increase userbase growth, we have to increase Advertising. If we try to control Advertising, we will have to compromise on growth. Advertising doesn’t allow for Facebook to focus on other forms of revenue generated as a result of no-ad. Things such as user loyalty, transparency and deeper social insights may be the trade-off. So, through appropriate advertisement, we can mange the userbase growth with increasing engagement.