Google Inc (GOOG): Explosive Growth In One Key Metric Shows Why Facebook Inc (FB) Is Headed Higher

One of the most promising upcoming ad products that could boost ARPU even further is the highly lucrative video ads, which could be playing on the News Feeds of hundreds of millions of users as soon as fall this year. The Wall Street Journal estimates that video ads could fetch Facebook $2 million per day, while Bloomberg believes that Facebook could get as much as $2.5 million per day for each video ad.

In addition to video ads, another source of increase in the Facebook’s revenue could be the monetization of its $1 billion acquisition, Instagram.

In the second quarter earnings conference call, CEO Mark Zuckerberg told us that Instagram had over 130 million MAUs and that this number is still growing rapidly. Since Instagram’s content is primarily photos and videos, I believe that any Instagram ads would be highly engaging and will carry relatively higher prices. As a result, successfully monetizing Instagram could give Facebook a huge revenue boost in the near future.

There is Facebook’s potential entry into the mobile payments market which is currently dominated by eBay‘s PayPal.

According to AllThingsD, Facebook is testing an online payments product that would allow users to shop on mobile apps using their Facebook login information instead of tediously entering billing details with each purchase. Although Facebook is staying away from payments processing for now, it could very well rival PayPal for a piece of the rapidly growing mobile payment processing market in the future.

Moreover, widespread adoption of an online payments product could give Facebook valuable information about users’ shopping preferences. This could then be leveraged for better ad targeting, resulting in higher ad pricing.

Foolish advice
For Facebook investors, the number one question has always been whether the social networking giant will be able to successfully monetize its 1.1 billion users. In my opinion, the strong acceleration in ARPU growth tilts the answer to that question toward “yes.”

The remarkable performance of Facebook Inc (NASDAQ:FB)’s mobile monetization strategy gives me confidence that the company will be able to successfully integrate video ads, monetize Instagram and potentially implement mobile payment processing at some point in the future. This is why I believe that Facebook could be a good long-term buy for Foolish investors.

The article Explosive Growth In One Key Metric Shows Why Facebook Is Headed Higher originally appeared on Fool.com and is written by Zain Zafar.

Zain Zafar has no position in any stocks mentioned. The Motley Fool recommends eBay, Facebook, and Google. The Motley Fool owns shares of eBay, Facebook, and Google.

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