Facebook?s mobile ad prowess may be matched only by Google
Facebook?s growing ability to monetize on mobile is transforming it into a generator of mobile advertising revenue with a prowess that may only be matched by Google.
Third-quarter mobile-advertising revenue represented about 66 percent of ad revenue, up from roughly 49 percent a year earlier. The results point to Facebook?s gradual evolution into an online-advertising juggernaut, benefiting from a growing number of mobile users.
?Facebook is getting stronger every day, as a community, a partner for developers and marketers and as a business,? said Mark Zuckerberg, the social networking site?s founder and CEO.
The ad-revenue surge in the latest quarter picked up where the prior quarter left off, when mobile ads accounted for 62 percent of the company's total ad revenue. Mobile ad revenue at Facebook could hit 80 percent within two years, experts say.
Revenue in the third quarter climbed 5.9 percent to $3.2 billion. Ad revenue shot up 64 percent to $2.96 billion.
?The major item to consider is that advertisers are moving a lot of budget towards Facebook,? said Ken Wisnefski, CEO, Webimax. ?This budget is coming from places like Google spends which will hurt Google while fueling the growth of Facebook.
?We have seen this transition to a large degree and it is ramping up to be even more dramatic as we head in to the holiday buying season,? he said.
In September, Facebook?s daily active users (DAUs) numbered 864 million on average, up 19 percent year-over-year. Mobile DAUs for the month reached 703 million, up 39 percent.
Monthly active users (MAUs) were 1.35 billion, up 14 percent, with mobile MAUs reaching 1.12 billion, up 29 percent.
Facebook?s biggest challenge remains managing costs and competition among advertisers.
?They?ve done so well with their targeted mobile ads that costs are going up, and advertisers are noticing,? said Craig Palli, chief strategy officer with Fiksu.
?Price-sensitive marketers may start to look for alternatives or limit their spend, and that alternative might be Twitter, which is offering a similarly precise mobile ad targeting product.
?Brand advertisers may chose a more familiar tactic instead, defining and buying audiences, which is increasingly possible through RTB exchanges,? he said.
In the second quarter, Facebook took a bold step with its Audience Network, by taking its biggest strength ? audience-targeting capabilities that span a huge portion of today's mobile users ? and applying it to additional properties outside its own walled garden.
?Our data so far shows it's performing very well, generally comparable to News Feed ads in key metrics like cost per purchasing user and average revenue per user,? Fiksu?s Mr. Palli said. ?This also suggests good things in store for Atlas, which takes this concept even further.?
A mobile ad-sales juggernaut?
Last month, Facebook relaunched Atlas, formerly a Microsoft property, which will enable marketers to target ads across multiple devices.
The margin of profit in Facebook?s the latest quarter climbed to 44 percent from 37 percent a year earlier.
Net income nearly doubled to $806 million, or 30 cents a share, from $425 million, or 17 cents a share.
Facebook?s tweaking of the targeting mechanism on its self-service platform gave advertisers better control of their spend and measurement of ROI, setting the stage for strong mobile ad sales results.
?It?s hard to say they?ve made any misstep in Q3,? said Mahi de Silva, CEO of Opera Mediaworks. ?Facebook has been quite conservative on making video ads available to all advertisers, focused on big brands and entertainment products.?
?The latest results give the market a better indication on the trajectory of their mobile ad business and how much of the mobile advertising market they control. Facebook is a leader in this space, but where will they be relative to Google? Number 1 or number 2?? he asked.
From a mobile-marketing standpoint, Facebook?s third-quarter earnings show that the social networking site has set a high bar, and the rest of the industry is trying to mimic its mobile success.
?The incredible growth of the share of their revenue coming from mobile has been fun to watch, and we're interested to see how it continues,? Mr. Palli said. ?Overall, Facebook's mobile story has been an impressive turnaround and shows the commitment to mobile as the future for that company.?
Another new feature being rolled out are Local Awareness Ads that give businesses the ability to easily incorporate geo-location targeting as part of their marketing strategy.
1 billion views
The quarter marked one billion video views on Facebook.
Facebook Budweiser campaign.
?During this summer?s Ice Bucket challenge, there were more than 10 billion views by 440 million people,? Mr. Zuckerberg said.
Another milestone dramatized the site?s success in connecting a vast number of people in what it calls public moments.
?There are now more than one billion interactions every week between public figures and their fans on Facebook,? the CEO said.
Facebook is aiming squarely at opening its resources to app developers.
?Over the next few years, our goal is to make Facebook the cross-platform platform for app developers to build, grow and monetize their apps across every major mobile platform,? Mr. Zuckerberg said.
Michael Barris is staff reporter on Mobile Marketer, New York.