Facebook Turns in Strong Quarter on Growth in Mobile Ads

Mobile Use Exceeded PC for the First Time in Fourth Quarter

By Published on .

Wall Street really wants Facebook to figure out mobile, and for the second-consecutive quarter, Facebook delivered.

Mobile ads accounted for 23% of Facebook's revenue over the holiday season, a far cry from last summer when CEO Mark Zuckerberg acknowledged it had a lot of catching up to do as users quickly abandoned PCs for tablets and phones.

Overall, Facebook didn't do so badly, either, as revenue climbed 40% over the previous year to $1.59 billion, including $306 million in mobile revenue, topping Wall Street consensus of $1.53 billion.

Mobile was the persistent refrain of the earnings call, with CEO Mark Zuckerberg noting that new versions of Facebook's apps are now shipping on a regular monthly cycle, and the goal for 2013 is "to get really good at building mobile-first experiences."

"I also think we'll be able to make more money for each minute people spend with us on their mobile devices," he said.

While Facebook's mobile-revenue growth is promising, it isn't keeping pace with Facebook users, which are abandoning PCs for mobile devices at a rapid rate. Mobile daily active users exceeded desktop daily active users for the first time in the fourth quarter of 2012.

Of Facebook's 680 million mobile monthly users (roughly 64% of its total user base of 1.06 billion), 157 million interact with the service exclusively on mobile devices.

Simon Mansell, CEO of TBG Digital, said his firm's clients are putting more of their Facebook ad budgets into news-feed ads that appear both on desktop and mobile, since those units generate more clicks and thus net a lower cost-per-click than ads on the right-hand rail. But since they generate more clicks, they also earn Facebook money at a higher CPM.

"This pricing difference will have encouraged savvy marketers to move more spend to mobile," he said.

Mr. Zuckerberg hinted at coming improvements to ad products, such as improvements to targeting and relevance. He also gave a hat tip to the "custom audiences" ad units that have recently generated a lot of buzz, which enable marketers to show ads to people in their customer databases whose emails, phone numbers or addresses they possess, and to segment them further using Facebook's targeting capabilities.

"We're designing better ad products that aren't just about links and text and images," he said.

While analysts had been looking for news about the contribution to revenue made by FBX, Facebook's real-time ad exchange, which was announced mid-year in 2012, not much was forthcoming. Chief Operating Officer Sheryl Sandberg did note that FBX is now serving a billion impressions and 1,300 advertisers a day.

Facebook Gifts and its performance during holiday retail season were also a subject of speculation going into earnings. The service launched in late September, signed up big-name retail partners like Fab.com, Brookstone and Starbucks, and was promoted atop some users' news feeds in the days leading up to Christmas, showing Facebook's intent to back the new service with some marketing muscle.

Dan Salmon of BMO Capital Markets had projected prior to earnings that it could reap in $173 million in revenue in 2013. However, Chief Financial Officer David Ebersman said that Gifts contribution to revenue, along with users' new ability to pay to promote their own posts, had been "very small" and likely to remain so for the duration of the year.

While Mr. Zuckerberg expressed enthusiasm about Facebook Gifts and "graph search," he also said he wanted to "temper revenue expectations" with respect to them.

"For the foreseeable future, the most important thing for us is to continue building out consumer experiences around these products," he said.

While graph search won't generate revenue in the near term, social-marketing firm Syncapse's CEO Michael Scissons said he's bullish about its potential in the long term.

"My expectation is we're going to see continued steady growth and continued advertiser interest [on Facebook], but it won't be a big hockey stick," he said. "The hockey stick is as they start to figure out search and the longer-tail opportunity."

In this article:
Most Popular