Considering the global patterns of Facebook usage, demonstrating
mobile ad revenue acceleration is critical for the company. There
were 819 million mobile monthly active users on Facebook as of June
30, up 51% over the previous year. That's 71% of the total who
access the social network at least once a month.
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The bottom line is that although desktop affords much more real
estate for ads, including a whole right rail that's missing from
the Facebook mobile app and is mainly embraced by direct-response
advertisers, fewer and fewer users will be logging in to see
it.
CEO Mark Zuckerberg observed that the network now has more daily
active users on mobile than on desktop. "Soon we'll have more
revenue on mobile than on desktop as well," he said.
Overall, Facebook came out well ahead of Wall Street consensus,
posting $1.81 billion in revenue, up 53% from last year's $1.18
billion. Ad revenue was $1.6 billion, or 88% of the total, and up
61% from last year. And net income was $333 million, compared to a
net loss of $157 million in the second quarter of 2012, when the
company filed for its initial public offering.
Facebook's performance last quarter was largely driven by
marketers growing their budgets for news-feed ads, which see higher
click-through rates than ads on the right rail, according to chief
financial officer David Ebersman. He also observed that news feed
ads are expected to be the main driver of Facebook's revenue growth
in the second half of the year and that ad prices in the U.S. and
Canada increased 40% year over year.
Social-ads company Optimal has accordingly seen a much greater
share of the Facebook spend managed by its system dedicated to
higher-performing news feed ads in the last six months, according
to its CEO Rob Leathern. They're sold at a much higher CPM, or cost
per thousand impressions, which benefits the social network's top
line.
"News feed has continued to be a larger and larger percentage
[of spend]," he said. "Earlier in the year we were at 30%, and
we're now well over 60%."
Facebook didn't break out revenue by ad format or shed any light
on how its exchange, FBX, is performing. (Chief operating officer
Sheryl Sandberg briefly noted that FBX is "a very small part" of
the business.) She also observed that revenue from direct-response
marketers, including e-commerce companies, had doubled year over
year.
Mr. Zuckerberg obliquely addressed the criticism that the
Facebook news feed has gotten too commercial. He said that about 5%
of news-feed posts seen by users are ads, and there's been no
observed drop-off in satisfaction. However, he acknowledged that
Facebook will continue watching user reaction closely.
"In recent studies people have told us they've noticed the ads
more, so we're going to invest in improving the quality," he
said.
Although the social network's global user base continues to
grow, there have been reports of Facebook fatigue setting in as
social-networking options multiply, particularly among American teenagers. Mr.
Zuckerberg confronted those contentions head on, asserting that
Facebook has close to fully penetrated the U.S. teen demographic
for some time, and that internal data shows there's been no
drop-off in monthly or daily use in that group, though it's
impossible to measure perfectly since some users lie about their
age.
"You could naively assume that more new [social] services mean
people spend less time on Facebook," he said. "[But] people are
spending more time on Facebook than ever before."
Facebook executives didn't address Facebook Home or the
company's long-awaited autoplay video ads, which Ad Age reported
were in development last December. The units could contribute
materially to revenue if marketers put concerns about disruption to
the Facebook user experience aside and adopt them. The asking price
was into the seven figures for a day-long "slot," but they're now delayed until the fall.
Ms. Sandberg also hinted that Facebook is hoping to give Twitter
a run for its money and not let it corner the market on advertisers
looking to do real-time marketing around major events unfolding on
TV, like the Super Bowl or the Oscars.
She twice observed that Facebook has a massive audience during
primetime hours, on the order of 88 million to 100 million
people.
