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Small businesses generate cash for Facebook

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Brian Wieser likes Facebook’s ad business. The senior analyst at Pivotal Research Group says investors should pay attention to the company’s ad revenue growth from small businesses, not just from large ones.

Wieser said while it may be hard for large brands to increase ad spending, Facebook’s new products, such as “promoted posts” and the FBX ad exchange, are bringing in the cash after launching last year. These new ad products are used by small businesses.

Facebook, which reports earnings after the bell Wednesday, said by the end of the third quarter, 300,000 small businesses were using promoted posts. That jumped to 500,000 in the next quarter. Now, Facebook claims 900,000 to 950,000 small businesses used promoted posts in the last 28 days, according to Wieser.

To put the revenue from those numbers in perspective, the average small business spends between $1,000 and $2,000 per-year advertising on Facebook.

He sees lots of strength in Facebook’s ad business because of small businesses. “The top line growth from these new sources of revenues … is going to create some outperformance versus a lot of expectations, and at the same time that legacy base of revenue [large advertisers] is really a bedrock foundation of modern, digital advertising.”

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