Facebook Inc. generated $5.637 billion in advertising revenue during the fourth quarter, the social network announced today. And 80% of that ad spending, roughly $4.510 billion, was spent on mobile ads.
Among the reasons retailers and other advertisers are spending so much on mobile ads is the social network’s massive reach. Facebook accounts for one in five minutes consumers spend on the mobile web, according to web and mobile measurement firm comScore Inc. And Facebook has more than 1.44 billion mobile monthly active users, along with 934 million mobile daily users.
“Heading into 2016, it is clear that consumers have shifted to mobile and businesses know they need to catch up,” said Sheryl Sandberg, Facebook’s chief operating officer, during a conference call with analysts. “Marketers now realize that if they want to reach their customers where they are, mobile is essential. Our conversations with clients have shifted from if they should market and mobile to how.”
Among the Facebook-owned marketers are seeking to reach mobile consumers is on Instagram, which has more than 400 million monthly active users.
Instagram in particular is an increasingly lucrative ad platform for Facebook, as well as one that is used by 98 of the 100 advertisers on Facebook. The image-focused platform boosted the number of impressions it served from 50 million in August, when it was still testing advertising on Instagram, to 100 million in September and then 200 million in October, according to a new report by Brand Networks. Instagram served 500 million impressions in November and 670 million in December.
Looking at the cost per 1,000 impressions across multiple industries, Brand Networks says the cost of Instagram’s ads fluctuated a lot—from $5.21 in September to a peak of $7.20 in November before cooling off at $5.94 in December.
Many retailers, such as Shop Direct, No. 10 in the latest edition of Internet Retailer’s Europe 500, used Instagram to drive sales during the holiday season, Sandberg said. For instance, Shop Direct teased upcoming sales with a cinemagraph video. The retailer then retargeted consumers who saw the video with one-day only deals. And on Black Friday, it used the social network’s ads to drive sales of products people had shown interest in, which resulted in a 20 times return on its ad spend. The campaign helped make Shop Direct’s Black Friday its most successful sales day ever, she said.
Sandberg said that Facebook sees a large opportunity to continue growing its advertising business.
“Last quarter we announced that we had over 2.5 million active advertisers and since then our growth has remained strong,” she said. “This represents a small fraction of the over 50 million small businesses now actively using pages. So we see a big opportunity to continue to grow the number of Facebook advertisers going forward. We’re also very pleased with the growth in advertiser adoption of Instagram.”
For the quarter ended Dec. 31, Facebook reported:
- $5.841 billion in total revenue during the quarter, a 51.7% increase from $ 3.851 billion in the same quarter of 2014.
- $5.637 billion in advertising revenue, a 56.8% increase compared with $3.594 billion.
- Mobile advertising revenue represented approximately 80% of ad revenue during the quarter, up from 69% a year ago. That would indicate mobile ad revenue was approximately $4.510 billion during the quarter, an 81.9% increase compared with $2.480 billion a year earlier.
- $3.60 in average advertising revenue per worldwide user, up 37.4% from $2.62 a year ago. Facebook calculates average revenue per user as its total revenue during a period, divided by the average number of monthly active users at the beginning and the end of the period; that is why the average revenue per user doesn’t equal revenue divided by its number of active users.
- $12.89 in average advertising revenue per user in the U.S. and Canada, up 56.1% from about $8.26 a year ago.
- Net income was $1.562 billion, up 122.8% from $701 million.
- 1.038 billion daily active users, an increase of 16.6% compared with 890 million last year.
- 1.591 billion monthly active users, up 14.2% from 1.393 billion.
- 934 million mobile daily active users, an increase of 25.4% from 745 million.
- 1.442 billion mobile monthly active users, a 21.3% jump from 1.189 billion.
- Of those monthly active users, 823 million accessed Facebook only through mobile apps or mobile versions of its web site. That’s up 56.5% from 526 million.
For the full year, Facebook also reported:
- $17.928 billion in total revenue, up 43.8% compared with $12.466 billion to the same period in 2014.
- $17.080 billion in advertising revenue, up 48.6% compared with $11.492 billion to the same period in 2014.
- Net income was $3.688 billion, a 25.4% rise from $2.940 billion.