Strong numbers
Facebook Inc (NASDAQ:FB)’s topline came in at $1.46 billion which represents a growth of 38% from the Q1 2012 sales of $1.06 billion. The company’s operating income for Q1 2013 stood at $373 million and net income for Facebook’s was $219 million. Facebook’s advertising revenues soared 43% on a year-over-year basis to $1.25 billion and now make up 85% of total revenues for the company.
The advertising growth was mainly driven by a 39% increase in the number of ads delivered along with a 3% increase in the price per ad. The portrayal of ads on News Feed on both mobile and desktop was instrumental for Facebook Inc (NASDAQ:FB)’s revenue growth, as it also increased the company’s price per ad significantly.
Advertising on mobile received tremendous traction making up 30% or ~$374 million in Q1 2013. Facebook’s revenues from desktop stood flat at $871 million from Q1 2012. However, it should be worth noting that advertisers want to display ads on Facebook Inc (NASDAQ:FB), and most of them don’t specify which medium to advertise in. Increased mobile usage led to more advertisements being placed on mobile devices. Revenues generated from payments and fees revenue for the social networking giant stood at $213 million which represents a 15% growth on a year-over-year basis.
Engagement is at an all-time high
Facebook’s user growth is still robust, as the company’s monthly user base increased 23% Y/Y and now stands at a whopping 1.11 billion, and 665 million of those users frequents Facebook Inc (NASDAQ:FB)’s platform on a daily basis. A major positive for Facebook in recent months has been the company’s mobile user-base and subsequent monetization. Facebook’s mobile MAUs stood at 751 million which represents a Y/Y growth of 54%.
User engagement measured in terms of the number of daily users as a % of total monthly users is at record levels in spite of wide-spread speculations by numerous newspapers that users are leaving in bulk.
Source:Company Data, Estimates
Facebook Inc (NASDAQ:FB) has managed to grow and stimulate user engagement almost every quarter from Q1 2009. It is rather evident that the company displaying more ads to users on PCs, or mobile is not impacting the end-user experience and doesn’t alienate users. Facebook’s rollout of ads on the News Feed has been a great monetization tool due to comparatively higher engagement than ads on the right hand rail, and these ads on News Feed have a much higher average price per ad as well.
Phenomenal position on mobile; Run-rate of $1.5 billion
Facebook Inc (NASDAQ:FB)’s mobile advertising run-rate of ~$1.5 billion is a phenomenal achievement by the company, and one that is even more impressive, primarily because in the year ago quarter ad revenues from mobile was virtually non-existent. Facebook hasn’t even started monetizing its Instagram platform by displaying ads and is likely to do so in the near-term.
Facebook Inc (NASDAQ:FB)’s recent unveiling of Facebook Home, is a great move towards satisfying and stimulating customers of the firm. A highly social and engaged audience is a great asset for Facebook, as it will be able to earn more revenues from mobile ads. The Facebook Home experience effectively steals some of the thunder of Google Inc (NASDAQ:GOOG) in its own Android OS. The Home function will be the first point of contact for users for all sorts of communication via Facebook on a mobile device. As a result, users of Home will be effectively spending even more time on Facebook’s platform than ever before which translates into much more enhanced levels of engagement, and more monetization opportunities through ad impressions.
According to data from comScore, 4 out of every 5 minutes on smartphones are spent on apps and Facebook Inc (NASDAQ:FB) leads the top app audience ranking in terms of mobile app engagement. Facebook accounts for 23% of all time spent on apps. Facebook’s rival, Google Inc (NASDAQ:GOOG) holds 5 of the top 6 apps in the mobile space. Google is also substantially ahead of Facebook in terms of monetizing users on mobile thanks to its Android OS and wide array of consumer offerings. Google has been generating a lot of revenue from newer hardware offerings riding on the wild success of Android. Tablet and PC sales along with service revenue from Google Play store crossed $1 billion in Q1 2013 for the first time. One thing is for sure, Facebook Home on Android will be having a negative impact on app engagement for Google Inc (NASDAQ:GOOG)’s services.
Going Forward
Facebook Inc (NASDAQ:FB) is in a very strong position to capitalize substantially in the rapid transition towards mobile computing from desktop. And the company’s newer initiatives will aid in that endeavor substantially. Facebook is going on an increased spending-spree to build out these major products, which implies near-term margin compression, but will drive long-term growth. Facebook introduced a number of newer ad products to better serve its advertising clients and the firm remains very focused on building its economic engine for the long-haul.
The article Facebook Is Poised To Outperform originally appeared on Fool.com.
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