The social network only added 38 million new monthly active users during the quarter. That's a little more than half the 70 million new users it added in the second quarter a year ago. 

Despite a slowdown in Facebook’s user growth rate in the second quarter, the social network’s advertising revenue jumped 42.3%, thanks in part to its strong mobile advertising business, the social network reported on Wednesday.

Mobile ads accounted for 91% of the social network’s ad revenue during the quarter, a four percentage point increase from 87% a year earlier. Based on that information, Internet Retailer calculates that Facebook Inc.’s mobile ad business grew 48.8% during the quarter to $11.865 billion from $7.973 billion a year earlier.

Videos, and video ads, are crucial to “winning on mobile,” said Sheryl Sandberg, Facebook’s chief operating officer, during a conference call with analysts. “Marketers are making more video of their own,” she said. “We’re seeing healthy growth in video ads among all advertiser segments. ” For example, M&M’s UK recently used mobile-optimized five-second video ads on Facebook and Instagram to introduce M&M’s Mix, a bag that includes three M&M variations. The campaign helped the brand increase sales more than 10% and 80% of that growth came from households that had not bought M&M’s in the previous 26 weeks, she said.

To help marketers quickly develop video ads, the social network in the second quarter launched Ads Animator, which enables advertisers to use photos and other content that’s already on their Facebook page to create video ads. It also recently announced a test of a Video Creation Kit that offers advertisers multiple video templates they can use for different marketing objectives.

The social network is also pushing advertisers to run ads on Instagram and in Stories, the section of the Facebook-owned social network where users and brands can post photos and videos that disappear after 24 hours. For example, during the quarter the social network launched a feature that automatically transforms advertisers’ square or horizontal videos into the  full-screen vertical format of Stories.

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However, despite Facebook’s advertising growth, its user growth rate slowed during the quarter. The social network only added 38 million new monthly active users during the quarter. That’s a little more than half the 70 million new users it added in the second quarter a year ago. Even so, it is still markedly larger than any other social network, with 2,234 billion monthly active users.

Looking ahead, the social network is eyeing growth on Instagram, which recently passed 1 billion monthly active users. Instagram currently has 25 million business profiles and 2 million advertisers. “With 1 billion active people on the platform, I think Instagram is definitely both a direct response opportunity but [also] an opportunity for discovery,” Sandberg said. “Part of it’s the format. The format is so visually appealing and people are telling stories with pictures, so we see both anecdotally and in the data that this is a great place for people to become aware of a product in the first place. And we see a lot of small businesses really able to do things on the platform.”

For the second quarter ended June 30, Facebook reported:

  • $13.038 billion in advertising revenue, a 42.3% increase from $9.164 billion.
  • Mobile advertising represented approximately 91% of ad revenue during the quarter, up from 87% a year ago. That would indicate mobile ad revenue was approximately $11.865 billion during the quarter, a 48.8% increase compared with roughly $7.973 billion a year earlier.
  • $5.89 in average advertising revenue per worldwide user, up 26.7% from $4.65 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.
  • $25.43 in average advertising revenue per user in the U.S. and Canada, up 34.3% from about $18.93 a year ago.
  • Net income was $5.106 billion, up 31.1% from $3.894 billion.
  • 1.471 billion daily active users, an increase of 11.0% compared with 1.325 billion last year.
  • 2.234 billion monthly active users, up 11.4% from 2.006 billion.
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