While Facebook Inc. has faced a barrage of criticism lately across a range of topics, including a data breach, privacy concerns and the inflation of its video metrics, that hasn’t stopped retailers from spending their ad dollars with the platform.
The social network’s advertising revenue rose 33.5% in the third quarter ended Sept. 30, the social network reported on Tuesday. However, that is a slowdown from the 42.3% growth it posted last quarter and 48.8% growth it posted in the same period last year.
Mobile ads accounted for 92% of the social network’s ad revenue during the quarter, a four percentage point increase from 88% a year earlier. Based on that information, Internet Retailer calculates that Facebook Inc.’s mobile ad business grew 48.8% during the quarter to $12.456 billion from $8.925 billion a year earlier.
The results suggest that retailers and other advertisers haven’t stopped buying Facebook ads. And they’ve embraced Instagram. Instagram ad spending jumped 61% during the quarter and impressions rose 58%, according to Merkle’s “Digital Marketing Report Q3 2018.” The cost-per-thousand impressions grew 1%.
Facebook’s ability to continue to grow its ad revenue will stem from its ability to entice marketers in its newer ad formats, such as ads that appear in Instagram Stories and the less-popular Facebook Stories. The Stories feature on both social networks enables users and brands to post photos and videos that disappear after 24 hours.
“We’re early in developing our ads products for Stories, so we don’t make as much money from them yet as we do from feed ads,” said CEO Mark Zuckerberg on a conference call with analysts. “We’re following our normal playbook here of building out the best consumer products first and focusing on succeeding there before ramping up ads. I’m optimistic that we’ll get ads in Stories to perform as well as feed over time, and that the opportunity will be even bigger because it looks like Stories will be a bigger medium than feed has been. But I want to be up front that even assuming that we get to where we want to go from a feed-only world to a feed plus Stories world, it will take some time and our revenue growth may be slower during that period like it was while transitioning our products to mobile.”
For Facebook to succeed, it needs to help businesses reach consumers who rapidly adapting to new tools, such as Stories and Instagram’s Explore feature, which features curated content, said Sheryl Sandberg, the social network’s chief operating officer. “Consumers often adopt new technologies before businesses do,” she said. “Our competitive advantage is helping advertisers close that gap. We’ve done this before on desktop, mobile and News Feed. In the early days, we helped businesses deliver personalized marketing at scale on desktop. With the shift to mobile, we’ve helped companies large and small build their mobile presence. Now, we’re doing it again.”
That’s crucial because consumers are increasingly using Stories and Facebook’s private messaging products such as WhatsApp and Messenger at the expense of the Facebook news feed or Instagram feed. “Because our services share a common platform, advertisers can use the same tools to buy across all our ad services,” Sandberg said.
One area the social network is focusing is e-commerce, such as Instagram’s shopping features that enables a retailer to add a sticker with a shopping bag icon to items that shoppers can buy within an image. A consumer can tap on icon to see more details about the product. 90 million people tap those product icons each month, she said.
Continuing a trend that emerged last quarter, Facebook’s user growth rate slowed during the quarter. The social network only added 37 million new monthly active users during the quarter. That’s 1 million fewer than the 38 million it added in the second quarter and only a little more than half the 66 million new users it added in the third quarter a year ago. Even so, it is still markedly larger than any other social network, with 2.271 billion monthly active users.
- $13.539 billion in advertising revenue, a 33.5% increase from $10.142 billion.
- Mobile advertising represented approximately 92% of ad revenue during the quarter, up from 88% a year ago. That would indicate mobile ad revenue was approximately $12.456 billion, up 39.6% from $8.925 billion a year earlier.
- $6.01 in average advertising revenue per worldwide user, up 20.9% from $4.97 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.
- $27.11 in average advertising revenue per user in the U.S. and Canada, up 31.0% from about $20.69 a year ago.
- Net income was $5.137 billion, up 9.1% from $4.707 billion.
- 1.495 billion daily active users, an increase of 9.3% compared with 1.368 billion last year.