Mobile ad revenue surpasses desktop in Facebook's Q2 earnings, driven by m-commerce, an industry that is expected to generate $500 billion by 2017.
Facebook's advertising business is growing healthily as the company continues to test new ad placements and units. Reporting on its Q2 financials on Wednesday, Facebook revenue totaled $2.91 billion, 61 percent year-over-year (YoY), beating analysts' estimates of $2.81 billion.
Of course, mobile is Facebook's big story: Mobile advertising accounted for 62 percent of the total ad revenue, compared to 41 percent for the same quarter last year. Facebook had 829 million daily active users last quarter, with 654 million mobile daily active users and 399 million who only accessed via mobile. In total, the network has 1.07 billion mobile monthly active users. Worldwide, average revenue per user was $2.24, with $2.06 coming from ads.
Digi-Day Capital, an advisory service for mobile and Internet companies, expects mobile Internet revenue to grow more than 300 percent, reaching $700 billion by 2017. Revenue growth will be driven by m-commerce, in-app purchases, and apps-as-service, Digi-Day says. Facebook's new Buy button that can appear in brand posts and ads could help Facebook land more of the $500 billion that Digi-Day expects m-commerce to generate by 2017.
In its earnings call, however, Facebook execs did not discuss whether the company would charge transaction fees or take a slice of m-commerce on its service. Chief operating officer (COO) Sheryl Sandberg emphasized that Facebook would not be selling directly, but skirted the issue of transaction fees. She said that the Buy button "streamlines the process of buying from our clients…Commerce is a growing part of our business, but we are not selling things directly. The more people buy on our platform, the more important we are to them."
Overall ad impressions were down, Sandberg noted, because of the increased proportion of traffic coming via mobile devices, which display less ads than the desktop. Executives on the call would not comment on ad pricing.
According to the Nanigans Global Facebook Advertising Benchmark Report for Q2 2014, CPMs on Facebook's desktop and mobile channels increased through the second quarter of 2014 to $1.95, an increase of 57 percent from the previous quarter and 218 percent year-over-year. It found that the most popular ad types are still in News Feed, comprising Unpublished Page Post Link Ads and Mobile App Install Ads. Nanigans provides advertising automation software that advertisers use in-house to manage social and mobile campaigns; the data comes from analytics of Nanigans customers that buy through the Facebook API and Facebook Exchange.
Nanigans said the average click-through rate (CTR) for Facebook ads also increased, up 47 percent from Q1 and up 146 percent year-over-year. Advertisers spent 56 percent of their Facebook ad dollars on mobile ads.
Sandberg also discussed the recent LiveRail acquisition, saying that, as the popularity and effectiveness of video ads grows, the LiveRail video ad platform could be used to deliver ads on and off Facebook, providing greater reach for marketers and developers.
She added that about a dozen Premium Autoplay Ads have now run on the network and "early data shows promising results." Sandberg also noted that Facebook would continue to roll these out carefully. And the same goes for Instagram ads, for which the company is seeing demand.
"The custom Facebook Audience capabilities are being adopted quickly and are now being used by 91 of the Ad Age 100," Sandberg commented. She also mentioned Website Custom Audiences, which lets websites target recent visitors to their sites, saying, "We're pleased with the early reactions."
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Susan Kuchinskas has covered interactive advertising since its invention. The former staff writer for Adweek, Business 2.0, and M-Business covers technology, business and culture from Berkeley, CA.
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