Facebook Inc.’s ad revenue in the fourth quarter of 2016 rose 53.1% from the same period a year ago, thanks in large part to the social network’s robust mobile advertising business that accounts for 84% of its overall ad revenue. For the full year, Facebook reported total revenue of $27.6 billion, up 54% from 2015, and a record net income of $10.2 billion, a whopping 177% increase from the prior year.
Given that advertising makes up roughly 98% of Facebook’s revenue, the $7.248 billion that retailers and other marketers spent on mobile advertising during the quarter made up more than 82% of the company’s revenue. That’s a major increase from the same period a year earlier, when mobile ads accounted for 77% of the company’s revenue.
Key to Facebook’s advertising business has been its ability to broaden its advertiser base, said Sheryl Sandberg, the social network’s chief operating officer, during a conference call with analysts. Facebook has successfully driven a significant share of the 65 million businesses operate Facebook’s free pages product and 5 million use Instagram Business profiles to advertise. “More and more of these businesses are becoming advertisers with over 4 million advertising on Facebook and over 500,000 on Instagram,” she said. “As a result, our revenue base is becoming more diverse. In Q4, our top 100 advertisers represented less than a quarter of our ad revenue, which is a decline from Q4 last year.”
That growth has been helped by Facebook’s push to develop ad formats tailored to specific verticals, such as retail. For instance, dynamic ads for retail show consumers the products available at nearby locations in real time.
Video is also playing an increasingly important role in Facebook’s future, said CEO Mark Zuckerberg. “I see video as a megatrend on the same order as mobile,” he said. “That’s why we’re going to keep putting video first across our family of apps and making it easier for people to capture and share video in new ways. To make it easier to find and watch videos, we’ve added a tab at the bottom of the Facebook app with top videos and recommendations. We’ve already rolled the tab out to everyone in the U.S., and we’re planning to bring it to more countries soon. We’re also improving live video as more people use it. New Year’s Eve was our biggest live moment ever, with more people going live than at any other time since we launched the product. We’re experimenting with Live 360 video, audio-only live for people with slower connections, and live face masks and more camera effects.”
That focus on video is forcing marketers to adjust. For example, the Hershey Co. used Facebook Live and video ads for the launch of it Cookie Layer Crunch bars, Sandberg said. “They optimized their video ads to grab attention in the first few seconds and used captions for people who were viewing without sound. Nielsen Brand Effect measured an 11 point lift in brand awareness and a 20 point lift in ad recall.”
Facebook’s strong earnings come a day after the social network announced it is expanding its relationships with measurement companies comScore Inc., the Nielsen Co. LLC and Integral Ad Science Inc., while also beginning a new one with DoubleVerify.
For instance, Facebook is working with comScore to test in-target reach for U.S. audiences on desktop and mobile through comScore’s validated Campaign Essentials product. The tool aims to measure the number of consumer impressions an ad receives, as well as the number of consumers reached within the targeted demographic.
The move aims to help address concerns over the accuracy of Facebook and Instagram’s metrics; in the latter half of 2016, Facebook several times admitted it miscalculated some metrics it had been sharing with retailers and other marketers.
For the fourth quarter ended Dec. 31, Facebook reported:
- $8.809 billion in total revenue during the quarter, a 50.8% increase from $5.841 billion in the same quarter a year ago.
- $8.629 billion in advertising revenue, a 53.1% increase from $5.637 billion.
- Mobile advertising represented approximately 84% of ad revenue during the quarter, up from 80% a year ago. That would indicate mobile ad revenue was approximately $7.248 billion during the quarter, a 60.7% increase compared with roughly $4.510 billion a year earlier.
- $4.73 in average advertising revenue per worldwide user, up 31.4% from $3.60 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.
- $19.28 in average advertising revenue per user in the U.S. and Canada, up 40.7% from about $13.70 a year ago.
- Net income was $3.568 billion, up 128.4% from $1.562 million.
- 1.227 billion daily active users, an increase of 18.2% compared with 1.038 million last year.
- 1.860 billion monthly active users, up 16.9% from 1.591 billion.
- 1.146 billion mobile daily active users, an increase of 22.7% from 934 million.
- 1.740 billion mobile monthly active users, a 20.7% jump from 1.442 billion.
- Of those monthly active users, 1.149 billion accessed Facebook only through mobile apps or mobile versions of its web site. That’s up 39.6% from 823 million a year ago.
For the full year, Facebook reported:
- $27.638 billion in total revenue, a 54.2% increase from $17.928 billion in the same period a year ago.
- $26.885 billion in advertising revenue, a 57.4% increase compared with $17.079 billion.
- Net income was $10.217 billion, up 177.0% from $3.688 billion.