Facebook to Yahoo! - here's how you do digital advertising!

Stuart Lauchlan Profile picture for user slauchlan July 23, 2014
Yahoo!’s results were basically just bad. Google’s were good, but with  bumps in the road ahead. Then there was Facebook. Oh boy, oh boy and then there was Facebook.

So Yahoo!’s results were basically just bad.

Google’s were good, but with the longer term prospect of some bumps in the road ahead.

And then there was Facebook. Oh boy, oh boy and then there was Facebook.

Revenues up 61% year on year to $2.9 billion would be impressive enough. But profits up 151% to $791 million - well, frankly it's starting to look like showing off!

Some other stats from the company's second quarter results to generate envious looks across the social media competitive landscape:

  • 1.32 billion people used Facebook in June
  • 63% of them - 829 million - visited the site every day.
  • More than 650 million people access the site via a mobile device.
  • People in the US spend around 40 minutes on Facebook each day.
  • About one in five minutes are spent on mobile.
  • People now send than 12 billion messages a day on Facebook.
  • In April the firm clocked up 200 million monthly actives on its Messenger service.
  • On average, more than 1 billion search queries are made every day on Facebook.

Those are numbers that frankly Yahoo! would kill for, but they’re still not good enough for Facebook CEO Mark Zuckerberg who notes:

This is more than any other app by far, but overall people in the US. spend about nine hours per day engaging with digital media on TVs, phones and computers. So there is a big opportunity to improve the way that people connect and share across -- how we all engage with the rest of media as well.

Still, he has very little to complain about as the revenue numbers indicate that Facebook has cracked the digital advertising game:

  • Total revenue grew to over $2.9 billion
  • Advertising revenue grew by 67% from a year ago to $2.6 billion.
  • Mobile ad revenue grew 151% year-over-year and that makes up 62% of ad revenue at $1.66 billion.
  • The average effective price per ad in the second quarter increased 123% year on year.
  • Total ad impressions declined 25% as the shift to mobile - where fewer ads are shown - continued.

Facebook’s success as a marketing platform for small businesses has become increasingly important to the firm with more than 30 million small businesses running Facebook pages with over 19 million of these are active on mobile efforts.  Some 1.5 million small businesses are defined as active marketers on Facebook.

Facebook COO Sheryl Sandberg highlights small business as one of the two main marketing targets for the firm:

Just a few weeks ago, I was in India and I hosted our first India SMB roundtable. One of the entrepreneurs I met, Vivek Prabhakar, built his house just a few years ago to raise the money to start his and his wife’s dream business Chumbak, a company that makes India-inspired products.

Facebook is Chumbak’s leading marketing channel and is responsible for 35% of online revenue and 38% of their website traffic. Their Facebook ads deliver a 5x return on advertising spend and has helped company grow to more than 150 employees in three offices.

We think we have a big opportunity to help SMBs like Chumbak grow their businesses. We’re also ramping up our engagement with this community. In the US, we’re hosting Facebook Fit workshops in cities like New York, Chicago and Miami to help small businesses. And we’re doing this globally, including forming our first European SMB cap.

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But it’s not just the SMB sector that’s of interest of course. Picking off the global brands isalso a key priority and here Sandberg cites some recent successes:

P&G and Gillette worked with us and agencies IVS and Mediacom to launch its Vector III razor to men in India. 80% of the 100 million Facebook users in India are on mobile and a majority of these are using feature phones. This was our first feature phone only Facebook campaign. It reached 60% of Gillette's target audience and generated significant lift in both message and ad recall.

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The World Cup also provided a great opportunity for brand building on Facebook. Facebook was an important part of this global event with 350 million people joining a conversation, generating 3 billion interactions. The final was the single most talked about sporting event in Facebook history, generating 280 million interactions from 88 million people.

Brands such as Diesel, Nike, Ford and McDonalds capitalize on this global conversation. McDonalds worked with agencies, OMD, Framestore, and ARC sponsorship, as well as Facebook's Creative Shop to produce 30 videos that used french fries as players. FryFutbol recreated the most spectacular World Cup moments and ran them as videos the very next day with the french fries acting as the players. This campaign reached 125 million people in 158 countries.

Larger brands overall are starting to understand the potential of Facebook as a platform, argues Sandberg:

I do think one of the things that’s happened in the last really year, year and a half on Facebook, is people understanding how strong the creative opportunity is. We’ve built out the technology platform and made our product investments and we’re really created particularly with the move to mobile and our ads on News Feed, an opportunity to do great creative story telling.

A great recent example is the Progressive ‘baby’ ads if you’ve seen them. They’re really engaging and really fun, but they’re making a really important point, which is people should be buying their own insurance, but the ability for them to do that ad is based on the technology we created and also the great work they’ve done with Arnold Worldwide, their agency on the creative part.

I think for a long time people have thought TV [is] creative storytelling and online ads work for more targeted text based results. And I think we’re seeing that change, which means that the way people approach TV, they’ll also approach Facebook and are starting to, which makes those budgets work much better together.

But when it comes to video advertising, it’s early days and Zuckerberg wants to make sure that there’s some quality control going on:

The biggest thing that we want to make sure is that quality is really good as we roll this out

One of the reasons why we’re optimistic about video ad is that in autoplay specifically, the format for both organic and paid content is that you’re scrolling through a feed and if the content catches your eye and you like it, then it’s playing and it's loaded and you can just easily continue watching it.Otherwise the person has complete control, and if they don’t like it, they can just keep on going through it. So the content has to be really good and we think that that’s going to be a real high quality experience.

There are still a number of things that we really want to prove and make sure that we're doing well here. We want to make sure that when people see an autoplay video, that’s not only paid content. We want a lot of that to be organic content as well. So we're trying to ramp up the amount of public content and content that people share at that same time as we're ramping up on the autoplay video ads.

We also want to make sure that this doesn’t consume a lot of people’s data. So we're just being really careful about how we handle that and getting that really right across different markets, that’s going to be a different thing that we want to be really sensitive to.

In a word this all comes down to quality and we’re more focused on just making sure that this is the right and best thing over time than something in the near term.

We do really think that these are going to be great things to help build businesses overtime. But we want to make sure that we don’t get ahead of ourselves because these things are early and quality is the most important thing for growing this the right way overtime.

The same philosophy will apply to Facebook’s ventures into virtual reality through its Oculus acquisition which has just closed. Here Zuckerberg is enthused:

There are huge opportunities to build the next generation of computing platform. When mobile was getting defined we were basically just getting founded, in 2004. The first smartphone came out and 2003. And we have mostly been a company that has played on top of the different mobile foundations that other companies have built.

One of the things that I care really deeply about on the ten years arc for the company is having a different relationship to whatever the next set of computing platforms are and investing accordingly now to make sure that when the next set of computing platforms get defined, we can help define what the next generation of computing is going to be.

So I think virtual reality, augmented reality, vision, some of the AI work that we’re doing, is all going to play into this in an important way. While I was emphasizing that we’re early on some of those businesses and we’re not going to rush those. The flip side to the coin is to emphasize that we’re also going to spend a lot and invest very heavily in a bunch of these things to do it right over the long term.

It’s not that we’re necessarily going to go out and have a lot more new strategic priorities, but we expect to go very deep on the priorities that we have to make sure that we completely nail them all, whether it’s a five year or a 10 year time frame.

My take

Read it and weep Marissa Mayer - and all the rest for that matter.

There’s not much more that can be said, other than to wonder how much longer it can go on like this. In the meantime, Facebook continues to show us - through the numbers at least - how to do digital advertising.

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