SocialSocial Media SmartsFacebook Relies on Mobile for Ad Revenue Gains in Q1

Facebook Relies on Mobile for Ad Revenue Gains in Q1

Monthly active use on mobile devices climbed to 751 million, marking a 54 percent increase from the year-ago period, as Facebook's total monthly active user base grew to 1.11 billion.

Advertising revenue from mobile devices comprised 30 percent of Facebook’s total ad revenue in the Q1 2013, up from virtually nil one year ago. Monthly active use on mobile devices climbed to 751 million, marking a 54 percent increase from the year-ago period, as Facebook’s total monthly active user base grew to 1.11 billion.

Facebook’s ad products delivered $1.25 billion, or 85 percent, of the $1.46 billion it generated in revenue during the quarter while payments carried the remainder, lifting the company’s net income to $219 million. Total advertising revenue grew 43 percent year-over-year.

Facebook’s CFO David Ebersman says the growth in ad revenue was driven by the strong performance of news feed ads. “Ad impressions were up 39 percent and average price per ad was up 3 percent compared to last year,” he adds.

COO Sheryl Sandberg also highlighted the success of Facebook’s mobile app install ad product. “During the quarter, 3,800 developers used these ads to drive nearly 25 million downloads. Of the top 100 grossing apps from the iOS and Android in the last week of Q1, about 40 percent of them used our mobile app install ads,” she says. “In gaming, travel, e-commerce, and the financial service industry, the early indicators are that our cost per install are highly competitive.”

Indeed, mobile has quickly become the growth engine for Facebook as desktop ad revenue remained flat.

“I think we’re still in the really early days of what we’re doing and that’s particularly true in mobile,” Ebersman adds. “We have an ad format that works on mobile and we have identity so that we can put the right ads in front of the right people…The big opportunity that’s right in front of us is trying to make the mobile advertising products higher quality and more relevant over time.”

Facebook’s custom audience tool is also gaining traction with more than twice as many marketers using the feature from the previous quarter, including brands such as Hotels.com, Intuit, and Virgin America.

“Facebook is finding some success on mobile because its ad strategy does not focus just on big brands. A focus on big brands is why Apple has failed at mobile advertising,” notes Krishna Subramanian, CMO of Velti, a mobile marketing and ad technology provider.

“Mobile installs are absolutely through the roof. These installs have made Facebook one of the biggest mobile ad suppliers in the world and are really what’s driving mobile revenue,” Subramanian adds. “Cross-platform targeting remains the single biggest prize for Facebook’s mobile revenue. Facebook’s precise user profiles, combined with targeting users across devices and off Facebook, will be an absolute gold mine when they figure it out.”

Facebook’s costs are also skyrocketing as it maneuvers to increase the frequency with which users visit the site, the length of those visits, and the overall number of users it reaches on a daily or monthly basis. Overall, the company’s costs jumped 60 percent year-over-year to $1.08 billion.

Wall Street’s immediate reaction to Facebook’s latest quarter was relatively calm. Company stock remained flat in after-hours trading as Facebook narrowly beat the market’s expectations for the quarter.

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