Facebook tops the $5 billion quarter mark as mobile ad spend soars

Stuart Lauchlan Profile picture for user slauchlan January 27, 2016
Summary:
Facebook's earning even more money that it's not going to spend on paying corporation tax, as mobile ad revenues shoot up.

Sheryl-Sandberg
Sheryl Sandberg

In the UK earlier this week it was reported that Facebook would be resisting any attempt by the tax authorities to backdate payments, news that attracted a whole heap of bad publicity.

Those of us in the UK who are this weekend paying more personal tax than Facebook pays UK corporate tax, will no doubt be delighted to note that the firm’s just turned in its highest ever quarterly revenues, topping the $5 billion mark on a 51.7% year-on-year growth surge. Net income meanwhile more than doubled year-on-year to $1.56 billion.

The key to this growth was a 56.8% bump in ad revenues which hit $5.64 billion across the quarter, driven by 2.5 million active advertisers. Mobile advertising growth was flagged up by Chief Operating Officer Sheryl Sandberg as particularly important.

More than 1.44 billion people use Facebook on mobile devices, while mobile ad revenue reached $4.5 billion, up 81% year-on-year and now accounting for 80% of total ad revenue. Sandberg said:

Heading into 2016, it is clear that consumers have shifted to mobile and businesses know they need to catch up. Marketers now realize that if they want to reach their customers where they are, mobile is essential. Our conversations with clients have shifted from if they should market and mobile to how. With over 1.44 billion people using Facebook on mobile monthly and over 400 million monthly actives on Instagram, Facebook and Instagram have become the two most important mobile advertising platforms.

This holiday season, marketers turned to mobile more than ever before. To reach a large global audience for the launch of Halo 5, Microsoft Xbox used optimized for Facebook and Instagram. Working with our agencies and power media team from Dentsu Aegs Network, Eisenberg Group and twofifteenmccann, they understood that people watch video differently in mobile newsfeed than on TV. So they created videos to capture audience attention in the first three seconds even without sound. They drove over 380 million impressions and 49 million video views in key markets and increased purchases by 10 points in the US.

There’s also a lot of shared activity across Facebook and Instagram, she adds, stating that 98 of the top 100 advertisers on Facebook also advertised on Instagram in Q4. She said:

Some of the spend is incremental and some of it isn’t. Some of our clients approached us where they have a social budget or Facebook budget and some of that moves to Instagram and some people, it’s incremental spend. In the medium to long-run however, we believe that we’re really well-positioned to take share from other platforms out there. We believe both Facebook and Instagram have this combination of an ability to do great creative with the best targeting in a most sophisticated measurement which shows businesses how we help them move products off shelves.

Innovation

Sandberg also talked up the need to create new advertising formats and channels, citing Slideshow as a case in point:

Slideshow enables a video like experience which phone with lower connection speeds and feature phone by series of photos. So, Coca-Cola used that in Kenya and Nigeria. They took screenshots of a video ad they have produced for other markets, they uploaded them with text; and they reached 2 million people with a 10-point lift in ad awareness. So, the way we need to drive sales around the world is by understanding markets, launching things like click to missed call ads in India and making sure our products work for market but also being able to connect to those advertising metrics and business metrics around the world.

Video is also increasingly important as an advertising medium, she added:

We have 500 million people watching video a day. The fact that so much video is being consumed on our platform gives us room for an ads business to grow because we want the formats to match. Marketers also really love video and it’s a really compelling way to reach people and video is contributing to our growth. It’s important to note that it’s not just large brand advertisers that are doing video, but all of our market segments - direct response, SMBs who have uploaded 1.5 million videos and have both organic and paid in the last month, and developers.

In terms of learnings, one of the most important learnings we have is that video formats are different on Facebook. There are certainly people that are watching the whole 30-second video ad with sound, but there are some people that are doing that less. They’re watching shorter formats and they’re watching with sound.

There's a learning curve here for the buy side as well:

One of the challenges we have in the market is convincing marketers and agencies and people that make the video to expand them with different formats. The good news is that we’re getting great results like the Halo 5 example.

When people are willing to experiment, this is a pretty unique canvas. You can do short form with sound off, you can be longer firm with sound on and everything in between. And our ability to persuade marketers to experiment is going to be a major driver of how much we can do here.

One thing that will be interesting to watch in 2016 is how much of the US Presidential Election is conducted via Facebook. While the inevitable ‘first proper social media election’ line will be trotted out (again) by the ‘experts’, Sandberg does see election ads as a big opportunity :

The 2016 election is a big deal in terms of ad spend but so is the World Cup, so Super Bowl every year, so are events like the Olympics. We are excited about the targeting we’re able to offer for our ad platform. We believe we have position that doesn’t exist on any other platforms. So, for example, using Facebook and Instagram ads you can target by congressional district, you can target by interest, you can target by demographics or any combination of those. We’re seeing politicians at all level really take advantage of that targeting.

Facebook is really the new town hall. And connecting the people who are running for office, both at the national and the local level with people directly has been really important. Every member of Congress in the United States is now on Facebook. We’re seeing some of them post every vote and explain why they’re doing votes. We’re seeing a bunch of that candidates for president get on Facebook themselves and interact taking questions from their potential voters directly. And we think that kind of direct engagement where people can hold their elected officials accountable and elected officials can speak directly to constituents is a really important part of our mission and we’re excited about the 2016 election and what’s happening there.

My take

The numbers are undoubtedly impressive:

  • More than 1.59 billion people now use Facebook each month.
  • 1.04 billion people use it every day.
  • More than 500 million people use events each month.
  • More than a 123 million events were created on Facebook in 2015.
  • For the first time, more than 1 billion people used groups in a single month on Facebook.

Then there’s Oculus, the internet.org stuff - the list goes on and on.

Now if Facebook could only bring itself to pay more corporation tax in the UK than I do as a one man limited company.

I won’t be holding my breath.

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