Here's Why the Best Is Yet to Come for Facebook

Facebook (NASDAQ: FB) just surpassed 2 billion monthly active users, and it's not showing any signs of slowing down. Nonetheless, the company faces challenges in continuing to grow ad revenue on its flagship platform and monetizing its messaging apps, Messenger and WhatsApp.

Despite this, Facebook is still well-positioned to capitalize on some big macro trends that ought to drive its revenue and earnings higher: the continued growth of online advertising, and the rapid growth in emerging markets -- where Facebook is adding most of its new users.

Digital advertising is still growing rapidly

Facebook is already one of the biggest digital advertising companies in the world. Last year, the company generated nearly $27 billion in ad revenue.

Even while Facebook is facing ad load saturation challenges, it stands to benefit from the influx of cash that's expected to hit digital advertising budgets over the next five years or so. MAGNA expects global digital ad spend to grow from $178 billion last year to $299 billion by 2021, a nearly 11% annual growth rate.

What's more, almost 80% of that growth is coming from social and video formats on mobile. Facebook is a dominant force in the former, and it's steadily making progress in the latter. In fact, social video ad spend grew 140% in the U.S. last year, reaching $2.1 billion. As Facebook continues to invest in video, it stands to capitalize on the megatrend and attract more big-brand advertisers looking for television-style commercials with digital ad targeting.

Monetization for Facebook's biggest group of users needs to catch up

Facebook has seen its user growth accelerate in Asia-Pacific over the last couple years. It counts 716 million people in the region as active users as of the end of the first quarter. That's its largest region, and the gap is only getting bigger.

But Facebook only generated $1.98 per user in Asia-Pacific during the first quarter. That's less than half its global average and just 12% of what Facebook makes per user in the U.S. and Canada.

The good news is that number ought to start climbing faster than the U.S. figure in the near future. Growth in ad spending in Asia-Pacific is expected to dramatically outpace growth in other regions, according to estimates from PricewaterhouseCoopers. Granted, some of that growth will come from China, where Facebook doesn't operate. Nonetheless, the trend ought to support increased value from the company's biggest geographic user base.

Should Facebook worry about the competition?

While these trends certainly favor Facebook, there's no guarantee that the company will be the sole beneficiary. New companies vying for digital advertising dollars crop up every day.

Facebook has quite a moat, though. With 2 billion users spending an average of over 50 minutes per day across its various properties, Facebook has more data on more people than just about anybody else. That's mighty attractive to advertisers both big and small. It's no mystery why 5 million businesses use Facebook for at least some of their advertising.

The biggest threat to Facebook is if users start spending less time on the platform. Users will keep joining Facebook (because you're weird if you have the internet and no Facebook), but with limited time in the day, their attention could be drawn to another social media app or service. Ultimately that would result in fewer ad impressions for Facebook.

That's why the company continues to invest in new features, apps, and even hardware to ensure it continues to captivate users' attentions. The company bought Instagram, WhatsApp, and Oculus in order to stay ahead of the curve. After failing to acquire Snapchat, the company set out to copy it, finally striking gold with Instagram Stories after several failed attempts.

Facebook is ruthless about winning users and their attention. Even as new competitors crop up, Facebook is big enough and willing enough to crush them before the challenge becomes unwieldy. As such, it's one of the most well-positioned companies to capitalize on the two big trends in advertising, so the best is yet to come for Facebook.

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Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.