Facebook has put other tech giants to shame by comfortably beating analyst expectations in the last quarter, with revenues over 50 per cent up thanks to surging mobile advertising sales.
As mobile web browsing continues to grow throughout the world, advertisers are realising that taking a mobile-first approach has the potential to be extremely lucrative. Facebook has looked to capitalise on this by improving its mobile app and expanding its live video solution, both of which have attracted advertisers.
As a result, advertising revenue increased 56.8 per cent to $5.20 billion, with mobile ad revenue accounting for approximately 82 per cent, up from 73 per cent this time last year. Total revenue rose from $3.54 billion the previous year to $5.38 billion this quarter and operating profit margin rose to 55 per cent from 52 per cent.
The results have led to extremely positive responses from analysts. Wedbush Securities analyst Michael Pachter said: "The company consistently 'warns' about higher spending, but they consistently manage their spending to deliver earnings upside. They're an impressive company, and they leave very little room for criticism."
Daniel Morgan, senior portfolio manager at Synovus Trust Company, described the performance as "by far the best number I’ve seen in technology," and Jan Dawson, chief analyst at Jackdaw Research, said there is plenty more to come: "They haven't yet turned on the monetisation spigot for Messenger or WhatsApp, so there should be significant headroom still."
Facebook also announced plans to create a new class of non-voting shares, designed to help CEO Mark Zuckerberg - who recently pledged to give away 99 per cent of his wealth - maintain control of the company whilst funding his charitable efforts.
Justin Taylor, UK MD at Teads commented: “Facebook’s earnings underline just how central video has become the digital strategies of most advertisers. We’re seeing brands prioritise ‘in-feed’ video advertising, which is less interruptive than traditional pre-roll formats offered by the likes of YouTube. Facebook has made the most of this and it’s clearly paid off.
"However, if the company is to maintain its position as the dominant social media platform, it must fiercely protect the user experience. One way to do this is to make video advertising ‘native’ – meaning it complements the surrounding page content or editorial. For example, a user reading about football will be served a relevant football-related product ad.
"For Facebook, this is challenging as it has very little editorial control over the user-generated content that appears on its site. This is where premium publishers such as online newspapers and magazines can gain the upper hand in the race for advertisers. They can offer advertisers a premium, safe environment for native video ads that are engaging because of – not in spite of - the content that surrounds them
"Expect the juggernaut that is Facebook to continue to attract video advertising dollars in the coming months, but expect premium publishers to also win their fair share of the growing pie.”
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