Facebook’s third-quarter earnings beat analysts’ expectations, with the social network reporting earnings per share of 43 cents. However, executives also described the company’s initiative to improve and expand its search capabilities, which ─ when coupled with its growing amount of user-generated content and proprietary customer data ─ will help it attract more advertising revenues in the future.
Kicking off the company’s earnings call, chief executive (CEO) Mark Zuckerberg reminded listeners of the goals the company identified last time for the next phase of the company: connecting everyone, understanding the world, and helping to build the knowledge economy. In fact, during the call, executives sounded like they’d taken a page from Google’s ambitions to change the world, catalog its knowledge, and make it accessible.
Google has been talking about connecting the world for at least a couple of years. For example, the search giant has experimented with installing free broadband in some American cities, and is reportedly looking at satellites and other means of bringing the Internet to countries in Asia and Africa.
In August, Facebook launched internet.org with partners including mobile phone hardware and software providers Qualcomm, Samsung, and Ericsson. Facebook’s mobile usage continues to expand, accounting for almost half of all usage. Mobile daily users were 703 million on average for September 2014, an increase of 39 percent year-over-year, while mobile monthly users increased 29 percent year-over-year.
“Understanding the world” sounds a lot like Google’s Knowledge Graph. Facebook is working to make user-posted content more searchable – and more intelligible. Zuckerberg said, “Over the past 10 years, an amazing base of knowledge has been built up. Now, we’re trying to find different ways to expose that and make it more useful to people.” Building services, including the beta version of Graph Search, will be a big focus for the company in the next few years, he added.
Zuckerberg said that while the body of Web content generated by Facebook is approaching equal size with all other Internet content, they address different use cases with different kinds of knowledge. Since a good proportion of what people post on Facebook is links to content hosted elsewhere, it’s interesting to consider whether ─ at least for some kinds of searches ─ Facebook search could supplant Google search.
Search certainly worked well for Google advertising: Google doesn’t break out AdWords revenue, but this quarter it reported revenue from sites that comprise AdWords-managed ads of $11.25 billion, or 68 percent of total revenues and a 20 percent increase quarter-over-quarter. Search could do the same for Facebook.
The rising importance of mobile for Facebook and digital in general could mean a shift in search behavior, according to Jason Hartley, vice president and search practice lead for 360i. Mobile’s effect on search, he says, has been “a more fragmented marketplace. Behaviors were pretty calcified on the desktop. On mobile, people are more inclined to use apps like Yelp. There is a place for Facebook to get into the search game in mobile.”
Brian Blau, research director, consumer technology and markets for Gartner, doesn’t see Facebook simply releasing an AdWords competitor, but he could see it offering more basic ad unit that somehow linked back to user context. He says, “I think they could improve search and certainly make it more robust. They will introduce new ad types over time, but they will always have some type of social context included.”
Facebook’s total third-quarter revenue was $3.2 billion, an increase of 59 percent, including ad revenue of $2.96 billion, up 64 percent year-over-year. Mobile ad revenue represented 66 percent of total ad revenue, up from 49 percent in the third quarter of 2013.
That seems to represent a significant chunk of all mobile advertising. According to IAB and PwC, global ad revenue in the first half of this year reached $23.1 billion, due to a surge in mobile ad revenue, to $5.3 billion from the $3 billion reported at half-year 2013.
While AdWords addresses the bottom of the purchase funnel, Hartley says, what you don’t get in search advertising is all the personal preference and profile information that could better inform search campaigns.
This October, the Facebook Audience Network went global, supporting link ads in addition to banners, interstitials, and native ads. Adding to its ability to siphon up user data for ad targeting is Facebook’s dominance in social logins. According to Janrain, in Q3, Facebook accounted for 46 percent of social logins, compared to Google’s 34 percent.
“Facebook has incredibly rich user data but they don’t do a great job of contextual advertising,” Hartley says. “Where it could be very powerful is if they could say to advertisers that they could bid on keywords like you do on Google as opposed to just audiences. Audiences plus intent – then you’ve got something really powerful.”
Adobe’s Q3 Digital Advertising Report found that Facebook posts by the media and entertainment vertical were up 100 percent year-over-year, while the retail industry had the largest increase in post interactions, up 13 percent year-over-year.
“We think our ad products and services are so unique,” Facebook chief operating officer (COO) Sheryl Sandberg said. She said that Facebook is making progress with brand advertisers, “brand by brand, because with our targeting, we are able to identify people who are in the market to buy a car, for example. Our ability to target means we have a strong play in every vertical.”
Adobe expects Facebook’s paid impressions to grow 10 to 20 percent next quarter, during the holiday shopping season. Whether that growth comes at the expense of Google remains to be seen.
While digital platforms and their advertisers grapple with digital video challenges, one savvy retailer found a way to capitalize on what would become the second most live-viewed channel in YouTube's history.
We all know that Facebook is a viable source of huge amounts of mobile traffic with relatively cheap CPCs). It’s too good an opportunity to ignore in today’s digital landscape - even if your mobile landing-page experience isn’t up to snuff.
For years now, brands have heard that augmented reality (AR) is one of the next big things, but there's a strong argument to be made that it hasn't quite lived up to the hype. Facebook CEO Mark Zuckerberg, however, believes that AR is a big part of the future.