A lot of retailers bought Facebook Inc.’s ads in the crucial fourth quarter, which helped drive a 48% jump in the social network’s advertising business during the quarter. For all of 2017, Facebook’s advertising revenue rose nearly 49%.
The vast majority of that ad revenue, 89%, stemmed from mobile ads. That’s a five percentage point increase from the same period a year earlier. And mobile-first video ads accounted for 50% of Facebook’s video ad revenue during the quarter, a nine percentage point increase from the third quarter, said Sheryl Sandberg, Facebook’s chief operating officer, during a conference call with analysts.
Mobile ads’ growth stems from changes in consumer behaviors, she said. “A year-ago, we saw a mobile conversion action taken on a mobile website after viewing an ad on Facebook surpassed desktop conversions for the first time,” Sandberg said. “In 2017 mobile conversions continue to accelerate. Data from 17 markets shows mobile accounted for 69% of online conversions on Black Friday and 64% on Cyber Monday. It also shows 80% of conversions on Singles’ Day, a popular day for online shopping in China and increasingly other countries. Big shopping days like these are the kind of global events that Facebook and Instagram are uniquely positioned to support. During these events and throughout the year, businesses are using our innovative ad products like dynamic ads to connect and reconnect with shoppers.”
As Facebook’s ad products mature, the social network aims to make ads more relevant and effective, she said. “Targeting makes advertising better more relevant to people and more effective for businesses,” Sandberg said. “This is especially important for small businesses and they had limited budgets and need to make every dollar counts. Facebook give small businesses the same powerful tools that were previously only available to large advertisers. So they can reach the right people at the right time.”
For example, Facebook is investing in what it calls value optimization. That’s an effort to help advertisers show their ads to consumers who are likely to spend more with them. It has gradually rolled the tool out to advertisers using web conversion dynamic ads and mobile app install ads and the early results have been “promising,” she said.
Facebook continues to evolve, said Mark Zuckerberg, Facebook founder and CEO, during the call.
“2017 was a strong year for Facebook in many ways. Our community continues to grow with more than 2.1 billion people now using Facebook every month and 1.4 billion people using it daily. Our business grew 47% year-over-year to $40 billion. I’m proud of the progress that our team has made, and the ways that Facebook is helping people around the world. Giving people a voice who didn’t have one before, strengthening relationships by helping family and friends stay connected wherever they are, and enabling more than 70 million small businesses to grow and create jobs. But 2017 was also a hard year. The world feels anxious and divided and that played out on Facebook. We’ve seen abuse on our platform, including interference from nation states, the spread of news that is false, sensational and polarizing, and debate about the utility of social media. We have a responsibility to fully understand how our services are used and to do everything we can to amplify the good and prevent the harm. This is my personal challenge for 2018.”
In the wake of research that Facebook is bad for consumers’ well-being, the social network announced earlier this month that it is shifting users’ news feeds back toward posts from friends and family and away from businesses and media outlets. The move, Zuckerberg noted, likely led consumers to spend roughly 5% less time on the social network in the fourth quarter or, put another way, the changes reduced the amount of time consumers spent on Facebook by an estimated 50 million hours every day. The net result for retailers, experts say, is that merchants that have relied on organic traffic from the social network may take a hit.
Even so, Zuckerberg suggested that retailers and brands could ultimately benefit from the move.
“When you care about something, you’re willing to see ads to experience it,” he said. “But if you just come across a viral video then you’re more likely to skip over it if you see an ad. So I want to be clear, the most important driver of our business has never been time spent by itself. It’s the quality of the conversations and connection. And that’s why I believe this focus on meaningful social interactions is the right one.”
Despite its challenges, Facebook continues to attract new users. The social network added 57 million new users during the quarter.
For the fourth quarter that ended Dec. 31, Facebook reported:
- $12.972 billion in total revenue during the quarter, a 47.3% increase from $8.809 billion in the same quarter a year ago.
- $12.779 billion in advertising revenue during the quarter, a 48.1% increase from $8.629 billion in the same quarter a year ago.
- Mobile advertising represented approximately 89% of ad revenue during the quarter, up from 84% a year ago. That would indicate mobile ad revenue was approximately $11.373 billion during the quarter, a 55.1% increase compared with roughly $7.335 billion a year earlier.
- $6.08 in average advertising revenue per worldwide user, up 28.5% from $4.73 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.
- $26.26 in average advertising revenue per user in the United States and Canada, up 36.2% from about $19.28 a year ago.
- Net income was $4.268 billion, up 19.6% from $3.568 billion.
- 1.401 billion daily active users, an increase of 14.2% compared with 1.227 billion last year.
- 2.129 billion monthly active users, up 14.5% from 1.860 billion.
For the full year, Facebook reported:
- $40.653 billion in total revenue, a 47.1% increase from $27.638 billion in 2016.
- $39.942 billion in advertising revenue, a 48.6% increase from $26.885 billion in 2016.
- Net income was $15.934 billion, up 56.0% from $10.217 billion.