Facebook Inc.’s ad revenue in the second quarter rose 46.9% from the same period a year ago.
That growth stems from the company’s robust mobile advertising business that accounted for 87% of its overall ad revenue, a two percentage point jump from the previous quarter.
“People are rapidly increasing the time they spend on mobile, and businesses know they need to be where consumers are,” said Sheryl Sandberg, Facebook’s chief operating officer, during a conference call with analysts. “Given the size and engagement of our audiences, Facebook and Instagram are the best platforms to reach people and drive business results.”
Video is an increasing important part of Facebook’s mobile ad strategy, she said. “Video on Facebook is personal, so it’s around connections, conversations, and communities,” she said. “This is why it creates opportunities for businesses to reach people in new and creative ways. People consume content faster on their phones, and marketers are increasingly recognizing that this behavior is different from other media.”
That helps explain why native mobile video ads typically outperform more traditional ads on Facebook. For example, when Tropicana launched its probiotic juice, the company tested six-second video ads against 15- and 30-second ads. The shorter ads delivered higher brand metrics across the board, including a 16-point lift in brand awareness compared to a six-point lift for the longer ads, she said.
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Facebook’s growth also stems from its ability to continue attracting new users. The social network added 70 million new users during the quarter. CEO Mark Zuckerberg touted the rapid growth of its Stories products, which enable users on Facebook, Instagram and WhatsApp to share slideshows of their day that disappear after 24 hours. Both Instagram Stories and WhatsApp Stories have more than 250 million daily users, he said.
The Stories product offers advertisers another way to reach consumers, Sandberg said. For example, Ben & Jerry’s created a brand awareness campaign using vertical video ads in Instagram Stories that generated a 14-point lift in ad recall and a two-point lift in purchase intent for its new Pint Slices ice cream, she said.
Facebook also aims to bolster the targeting tools it offers advertisers, she said. For instance, it recently rolled out a tool called value optimization that helps retailers and other businesses show ads to consumers who are most likely to spend based on previous purchase behavior. It also introduced value-based Lookalike Audiences, which uses machine learning to help marketers reach people who are similar to their most valuable current customers. She pointed to electronics accessories retailer Nomad to demonstrate how merchants can leverage those tools. Nomad used Facebook’s Custom Audiences tool to build an audience of U.S. consumers who bought something on its website, and then created a multi-country Lookalike Audience of consumers with similar characteristics. The retailer then targeted ads to its international audience across Facebook, Instagram and Audience Network, which produced a 2.7 times return on ad spend.
Colin Sebastian, an analyst at Robert W. Baird, says the results show Facebook’s business is strong. “Given that Facebook’s growth remains healthy and robust, we believe any lingering concerns over user engagement and social competitors should dissipate, as few companies share Facebook’s combination of scale, strong technology orientation, and platform breath/diversity,” he writes in a research note.
- $9.321 billion in total revenue during the quarter, a 44.8% increase from $6.436 billion in the same quarter a year ago.
- $9.164 billion in advertising revenue, a 46.9% increase from $6.239 billion.
- Mobile advertising represented approximately 87% of ad revenue during the quarter, up from 84% a year ago. That would indicate mobile ad revenue was approximately $7.973 billion during the quarter, a 52.1% increase compared with roughly $5.241 billion a year earlier.
- $4.65 in average advertising revenue per worldwide user, up 25.3% from $3.71 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.
- $18.93 in average advertising revenue per user in the U.S. and Canada, up 37.8% from about $13.74 a year ago.
- Net income was $3.894 billion, up 70.6% from $2.283 billion.
- 1.325 billion daily active users, an increase of 17.5% compared with 1.128 billion last year.
- 2.006 billion monthly active users, up 17.2% from 1.712 billion.
For the first half of the year, Facebook reported:
- $17.353 billion in total revenue, a 46.8% increase from $11.818 billion in the same period a year ago.
- $17.021 billion in advertising revenue, a 48.8% increase compared with $11.440 billion.
- Net income was $6.958 billion, up 73.0% from $4.021 billion.