“This is a good quarter for us,” stated Facebook CEO Mark Zuckerberg on a conference call with analysts recently, “But there’s still so much room to grow.”
Evidence of it being a good quarter – and a good year – for the online media giant is clear. Its revenue rose 61% to $2.91 billion in the second quarter, and generated a profit of $791 million – up from $333 million a year ago. User numbers continue to increase, which has silenced a lot of critics that worried that the “cool” factor would wear off for younger generations. In the second quarter of 2014, Facebook added another 40 million users. It’s estimated that one-fifth of the world’s population logs on to the social network at least once per month.
With user numbers on the increase, Facebook is refining its advertising strategy. Monetizing those users has long been a concern for the social network, which started running ads nearly 10 years ago. Now its attention is turning toward mobile advertising in order to tap into the $304 billion expected to be spent in ecommerce this year. It’s also estimated that U.S. retailers will spend $11.2 billion on digital ads, with 37% of that number spent in the mobile sector. Mobile advertising as an industry is expected to overcome newspapers, radio and magazines for the first time ever during this year. (eMarketer)
Facebook is in a good position to capture a good chunk of that ad spend, and is in an entrenched battle with Google for mobile ad dollars. For the ninth straight quarter, Facebook has had revenue that topped all estimates, and its profits more than doubled in the most recent quarter. Advertising on mobile devices now accounts for 62% of Facebook’s ad revenue. However, Google still remains number one in the mobile ad space – and it holds a market share of 49.8%. Facebook is expected to garner about 18% of the mobile ad market in the coming year.
Growth two years after IPO.
Facebook’s growth in the mobile sector is welcome news two years after their controversial initial public offering. It has successfully shifted its revenue base from traditional web advertising to the mobile platform – and investors have taken notice. Facebook’s shares have risen 3.7% percent this year to a close of $75, which breaks the latest record of $72.59 reached in March 2014. The share value is nearly double Facebook’s initial public offering price of $38.
The social networking company has been able to position itself at the crux of what media buyers are looking for – exposure in the social and mobile space. Advertisers both large and small consider Facebook ads a “must buy,” and the company is limiting the supply of those ads – to further increase demand for its advertising.
Reaching consumers where they are.
Advertisers want to reach consumers where they are, and that place has increasingly become Facebook. In June of this year, Americans spent one of every six minutes spent online on the social network, and one of every five minutes on mobile phones. In order to get better results in advertising to these users, the company has been testing a feature to allow small business to launch ads that direct traffic to their pages and posts within the social network. This makes the transition from ad to destination page seamless. As an added bonus, Facebook advertisers can use advanced analytics to help them find people who are already buying similar products or services.
In addition to smaller brands and businesses, Facebook has been able to work with major retailers like Amazon. The online retailer has increased its advertising spend with Facebook, and eBay has as well. Facebook expects that more and more retailers will use its platform as a marketing channel.
Testing mobile ads, and going forward.
And if major retailers like this aren’t enough to show Facebook’s commitment to mobile ads, the company began testing an embedded “buy” button in mobile ads, allowing users to click on an ad from their smartphone and purchase the product directly. In addition, the company has dedicated an entire team to work on high-level mobile campaigns from retailers around the world. Its creative and consulting services are poised to partner with big brands and ad agencies so everyone can get the benefit of exposure on Facebook ads.