Mobile revenue run rate stands at $2.6 billion
One of the major bright spots in Facebook’s earnings report was the company’s mobile monetization. Facebook’s advertising revenues on mobile surged to approximately $656 million in 2Q13, which is roughly 36% of Facebook’s total revenues. Facebook’s annualized mobile ad revenue run-rate was $1.5 billion in the last quarter, which jumped to $2.6 billion in 2Q13. Mark Zuckerberg stated in Facebook’s earnings call that soon he expects to have more revenue on mobile than on desktop.
Facebook mobile monetization rate is only second to Google Inc (NASDAQ:GOOG), as the search engine giant has previously stated it is earning in excess of $8 billion from mobile ads. But unlike Facebook, Google has seen a decline in the cost-per-clicks that marketers are willing to pay, in spite of seeing growth in paid-clicks. As a result, Google’s stock saw a sharp sell-off after its last quarter earnings.
Marketers are digging in; Strong reception for ad products
Facebook’s advertising growth has been spurred by the healthy levels of ROI advertisers have been receiving on the platform. The company has seen growth across its four marketing segments including direct response marketers, mobile app-install ads, local businesses and big brand advertisers. In particular, direct marketers, including e-commerce marketers, saw a big 50% Y/Y increase in ad spending.
Mobile app-install ads are also driving revenues for the company mainly from developers. And the numbers of local businesses on Facebook increased to ~18 million, and this advertiser segment is increasing their advertising budget. And lastly, brand marketers are using Facebook’s massive and engaged audience to drive awareness and ramp up sales.
In terms of ad products, Facebook increased the type and frequency of ads placed on its News Feed, and the pricing in terms of click through rates and cost-per-click remained healthy. Newsfeed ads have done exceptionally well at driving high levels of user engagement, and a significant increase in click-through rates and number of marketers, which led to larger budget allocations from advertisers. Overall ad impressions increased 43%, and the average price per ad increased 13% Y/Y. The average price per ad in the U.S. and Canada surged 40% Y/Y due to the strong performing News Feed ads.
Even though mobile usage is growing at a rapid pace, the amounts of ad spend on mobile is just 2% globally and 3% in the U.S. The company is expecting Newsfeed ads to be a solid growth driver in 2013.
Going Forward
Mark Zuckerberg wants to keep on Facebook growing its user base and connect more users especially in developing markets. He stated that the company’s longer term growth prospects would be to develop more useful information for users such as what activities users are interested in, and finding restaurants and hotels your friends have stayed in. And the company is planning to grow the presence of Instagram further, before developing a monetization strategy. In addition, Facebook’s average revenue per user in Asia and the Rest of the World is significantly behind the U.S. and Europe and should narrow the gap in the long-run.
Right now ads on Facebook make up about 5% or 1 in 20 stories on average on the News Feed, and this ratio is likely to increase in the future, as the company pushes for more revenue growth. As a result, the company is likely to see high growth rates for the foreseeable future.
The article Facebook: Firing on All Cylinders originally appeared on Fool.com.
Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Ishfaque is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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