Social Media

Why small businesses are crucial to Facebook's future

Facebook's small business strategy
Facebook's small business strategy

Facebook's second-quarter earnings beat expectations across the board, accelerating growth of its daily active users, and making far more money than expected from each of them. There are plenty of factors driving Facebook's growth, including the explosion of video and advertisers' shift to mobile ads.

But this quarter showed, more than ever, how small businesses are a huge piece of Facebook's future.

There are now 60 million businesses using Facebook Pages each month, the company said. What's most striking is 10 million of them joined in just the last quarter. Most promising for Facebook's bottom line: Only 3 million of that 60 million are advertisers, which means a huge opportunity to convert the remaining 57 million with a number of easy ways to turn free posts into paid ads.

"Business owners start with the organic products, and then they move, when they see value, to invest in the paid products," said Dan Levy, Facebook's vice president of small business. "One of the things that's interesting is more than 80 percent of our new advertisers start off with just simple page posts that they end up boosting with a little bit of money. They learn how to do it in the same way they would create content as a user. They see value and then they're willing to invest the money from there."

Nicolas Asfouri | AFP | Getty Images

Levy attributes the dramatic increase in businesses on the platform in part to the fact that Facebook has created more specific types of pages, and new tools for companies to communicate with consumers. "If you're a local restaurant you can post your menu and specialize it. If you're a local services business, you can put more info about how to contact you," said Levy.

"We've created ways for consumers to message a business, which we're seeing an increasing trend of. We know that not all businesses are the same, and with more than 60 million businesses, there's a diverse set of needs, so we're really trying to create a product that's both valuable to all businesses but specific to each one," Levy said.

Thanks to these tools, businesses are increasingly turning to Facebook as their primary advertising channel. "If you think of new businesses that are being created today, like niche consumer products, Facebook's really the only place they can target and reach an audience for specialty designer socks, or other things it would be hard to advertise out to a broad public."

And Facebook provides small businesses with an opportunity to create video ads that they never had before, and 2.5 million small businesses posted a video ad just in the past month. "If you think about how hard it is to create a video ad — even five years ago it meant getting TV cameras and a production crew," said Levy. "Today business owners can take their smartphone out of their pocket; they can film something in a few minutes."

Even the "Pokemon Go" phenomenon is having an impact on Facebook, as small businesses advertise the fact that there are Pokestops at their stores. "We think business owners are going to be smart and do whatever they can to drive business to their store," said Levy.

"There was a restaurant in Philadelphia that we're familiar with called The Dining Car and they've actually mentioned that they've created a new Pokemon drink related to them being a Pokestop, and they're telling us that it's helping drive more traffic into their restaurant," he said.