Revenue Jump Reflects Facebook’s Mobile Mojo

Facebook Q4 2014 and year-end earnings show increased contribution of mobile, while execs pump measurement.

Date published
January 29, 2015 Categories

Facebook’s mobile-first strategy paid off with an increase in mobile’s share of ad revenue, as well as better-than-expected overall revenue. The social network also increased its dominance of social media.

On January 28, Facebook reported earnings for the fourth quarter of 2014 and the full year. Revenue for the quarter was $3.851 billion, beating analysts’ expectations of $3.77 billion. Revenue for the full year 2014 was $12.47 billion, an increase of 58 percent year-over-year. Revenue from advertising was $3.59 billion, up 53 percent from the same quarter in 2013. Mobile advertising revenue continued increasing its share of all ad revenue, representing approximately 69 percent of advertising revenue for the fourth quarter of 2014, up from approximately 53 percent in the fourth quarter of 201. Even desktop revenue was up 1 percent, although overall desktop usage was down.

A recent ShareThis study found that in the fourth quarter of 2014, Facebook earned 81 percent of all social media shares.

According to the Nanigans Q4 2014 Global Facebook Advertising Benchmark Report, global click-throughs for Facebook increased 197 percent year-over year. Nanigans makes multichannel advertising-automation software, and this data comes from customers using its platform for ads on desktop and mobile, but excluding Facebook Exchange. Cost-per-clicks increased quarter-over-quarter to $0.64, rising 37 percent year-over-year. Effective cost-per-mille (CPM) increased 48 percent in the last quarter, while effective CPMs for domain ads in the right-hand column more than doubled quarter-over-quarter. Facebook also redesigned domain ads last quarter.

Facebook chief operating officer Sheryl Sandberg said, “People are bigger believers because we’ve had the opportunity to do more measurement over the last year. … In the past one and a half years, the investments we’ve made in building out measurement have paid off.”

Sandberg said Facebook has actual case studies that use A/B testing to see Facebook ads’ effects on sales. “Across the board, we’re showing healthy, competitive ROI,” Sandberg said. “The challenge now is to scale. It’s on us to prove to them that the results we’re showing in smaller tests can happen [in more countries with larger spends.]”

Sandberg said that Atlas, which Facebook launched in September 2014, would “revitalize marketing by making the measurement more accurate.” She pointed out that cookies are not adequate measurement tools in a world of multiple device use. The ability to identify one user across multiple devices, she said, “will massively improve efficiency in the system as it gets adopted.”

A report by Deloitte released on January 20 said that Facebook is enabling economic activity in developing and emerging markets the way that eBay used to. Facebook’s Global Economic Impact said the company had added $227 billion and 4.5 million jobs to the world economy in 2014.

On the call with investors, chief executive Mark Zuckerberg seemed to promise that WhatsApp and Messenger would be monetized. “We expect WhatsApp and Messenger to become indispensable services and important contributors to our business,” he said. Messenger reached 5 million monthly active users in November, while WhatsApp transmits more than 30 billion messages each day.

Zuckerberg pointed out that Facebook initially resisted the urge to post ads on Facebook, instead providing businesses with Pages, so they could organically interact with consumers. On WhatsApp and Messenger, he said, “People are just starting to figure out what the organic interaction is. … We just have to do it right.”

Craig Elimeliah, senior vice president and director of creative technology for RAPP, says that marketers are willing to take chances and try out new offerings on Facebook. “Any time it puts out a new product for marketers, there’s high adoption. They’re not always spot on with their products, but there is a relatively low barrier of entry for them to get marketers to test new products simply because of scale of the platform,” he says.

Facebook plans to maintain but downplay FBX, allowing it to continue to serve advertisers that want to reach people on desktops. It’s also adding more retargeting capabilities to Custom Audiences.

“Facebook is going to have to evolve,” Zuckerberg said on the earnings conference call today.

Elimeliah wants Facebook to focus on expanding its core toolset in order to drive deeper engagement. “Facebook has all this amazing first-party data on everyone. They know the time of day, the types of things people are posting. You’d think a network like that would be able to build something programmatic that would allow marketers to target more context interactive engagements,” he says.

For example, if someone checks into a restaurant, Facebook should enable marketers to target him with a message about a place to go for drinks afterward.

“Facebook did very good job at addressing the mobile concern. Now, they need to open up their aperture for interactivity beyond the typical Facebook mechanics. The like button, for most marketers, has become quite weak and diluted. We want more,” Elimeliah says.

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