Facebook CEO Mark Zuckerberg told investors last quarter that its Stories feature "is the future" for the platform and will eventually "be bigger" than the News Feed. So far, that prediction seems to be panning out, a new report on Facebook advertising found.
During Facebook's third-quarter earnings call, Zuckerberg touted the potential of Stories, the full-screen photos or videos users can share on Facebook and Instagram that disappear after a day. The feature, similar to that of Snap-owned Snapchat which originally had Stories, holds even more opportunity for the company than its News Feed, the vertical scrolling feed of posts from friends, according to Zuckerberg.
At the time of the call, the company's leaders said they were still figuring out the best way to monetize Stories and teach advertisers how to create ads for the product. But it seems advertisers are already catching on, according to a new report on Facebook advertising by Facebook marketing partner Nanigans.
According to Facebook's site, companies apply to be part of the marketing partners program based on specialization in categories like ad technology and measurement that can help marketers build effective campaigns on Facebook's platform. Ryan Kelly, vice president of marketing at Nanigans, said in an email that the company does not get paid to be a part of the program.
"Over the past year, advertisers leveraging Stories have increased budgets dedicated to the format at 124%," the new report says, as quoted in a note from Deutsche Bank. "Make no mistake, News Feed (non-Stories) ads are still king, with a vast majority of ad spend among Nanigans customers going to these ads. However, the Stories format is quickly emerging as an ad placement that can perform in the same league as other ad units within the Facebook ecosystem."
Deutsche Bank said this is further proof that Stories advertising is working.
"[W]e have been hearing broadening positive feedback around the Stories ad unit from conversations in the ad community," analysts wrote.
Still, the analysts cautioned that Facebook ad revenue could slow before ramping up since most ad revenue comes from smaller marketing businesses that will need time to adjust to the new format. Deutsche Bank said it expects Facebook ad revenue growth to decelerate in the fourth quarter of 2018 and first quarter of 2019, then see stability in the following quarter.
The analysts also noted Nanigans changed its methodology for "tracking spending across multiple geographies." In the report, Nanigans said the data "should not be compared with prior reports and may not necessarily be a proxy for trends in the overall Facebook advertising marketplace." Kelly, the Nanigans vice president, said it updated its methodology to "better reflect how advertisers approach their Facebook campaigns by objective."
Disclosure: CNBC parent NBCUniversal is an investor in Snap.