Facebook reported $9.32 billion in revenue and a significant share came from mobile advertising for the quarter ended June 2017 (Q2 2017). Mobile ad revenue stood at a staggering $8 billion, growing 53% YoY and represented 87% of the ad revenue. This share has grown from 85% as of last quarter, even after CFO David Wehner said that Facebook has been running out of ad spaces on news feed. COO Sheryl Sandberg said that Q2 Ad revenue grew 47% year on year.
Desktop ad revenue, on the other hand, grew by 17% “despite an ongoing decline in desktop usage…our Q2 desktop ad revenue benefitted from our efforts to limit the impact of ad blocking technologies,” Wehner said during Q2 2017 conference call with analysts. The social media company had noted last quarter ad revenue would fall, but the exact opposite has happened. Overall ad revenue grew by 16.6% QoQ to $9.16 billion from $7.8 billion.
The average price per ad increased 24% and the number of ad impressions increased 19%, primarily driven by mobile feed ads on Facebook and Instagram. Desktop ad revenue was helped by Facebook’s efforts to limit the impact of ad blocking. Wehner, said that “we continue to expect that Facebook ad load will play a less significant factor driving advertising revenue growth going forward and that desktop ad revenue growth rates will slow in the second half of 2017 when we begin to lap efforts to limit the impact of ad blockers.”
Facebook also extended their Dynamic Ads to more verticals and categories during the quarter. Dynamic Ads essentially allow businesses to upload their product catalog and create campaigns targeting specific products to specific audiences. This includes advertising retargeting across devices.
The company’s top verticals were e-commerce, CPG (Consumer Packaged Goods), entertainment, media, retail and gaming.
So Facebook is now going to focus on Messenger, WhatsApp and video ads and other mobile based ad formats to grow its ad revenue in the future. CEO Mark Zuckerberg said during the call that the company will also work on building “a business ecosystem around Messenger and WhatsApp. Messenger and WhatsApp both have large communities and are growing quickly…It’s still early on the monetization side here, although we have started showing ads to a small number of people on Messenger.”
“If you’re a business and you have a higher ROI for interacting with a person in your messaging thread than you do on the mobile web or trying to get them to install an app, then that creates this positive feedback loop where you’re going to point your ad towards the Messenger thread, you’re going to invest more of your engineering resources in building out the content and experience around the Messenger thread.”…”I actually think in — over the next couple of years or a few years, the much bigger driver of the business and determinant of how we do is going to be video, not Messenger. Messenger, I think, is a really important thing and WhatsApp over a 3- to 5-year period and we’re investing a lot and that is huge opportunity. ” – Mark Zuckerberg
COO Sheryl Sandberg said that the company will push more video formats on these mediums (like messenger) to help increase ad revenue.
- More than 70 million businesses on Facebook
- More than 15 million businesses profiles on Instagram
- Instagram Stories now has more than 250 million people using it daily
- WhatsApp Stories also has more than 250 million people using it daily.
- In June, 1.32 billion people visited Facebook on an average day, up 17% compared to last year. This was 66% of the 2.01 billion people that visited Facebook during the month of June, which was up 294 million or 17% compared to last year.
- 5 million advertisers on Facebook
- 1 million advertisers on Instagram
Some more notes from the conference call:
“More video is being shared and watched on Facebook than ever before,” Sandberg said, “and it’s increasingly helping people and businesses connect.”
“In a mobile environment, native mobile video ads typically outperform more traditional ads. For example, when Tropicana launched its probiotic juice, the company tested 6-second video ads against 15 and 30 second ads. The shorter ads resulted in higher brand metrics across the board, including a 16- point lift in brand awareness compared to a 6-point lift for the longer ads,” she added.
Wehrer said that Facebook’s strategic focus on driving engagement with mobile video “may slow advertising impression growth given the relatively fewer ad impressions in video relative to News Feed.”
Facebook is currently testing the ability to put a short ad break in uploaded videos. The company is looking to add to more publishers in the United States.
AI for fighting terrorism and extremism online
The social media giant is also focusing more on Artificial Intelligence (AI) capabilities for a number of things like filtering out extremist content, for targeting ads, better group suggestions, among others. “To keep our community safe, we rely on people flagging content that might violate our community standards for us to review. In the future, AI will be able to help flag more of this content faster and before anyone has to see it,” Zuckerberg said during the analyst call.The company has already deployed AI to filter out propaganda and extremist accounts and Zuckerberg claims to have started experimenting with AI “to understand text that might have been used to promote terrorism.”
He added that more products and services from Facebook will utilize AI for better suggestion and targeting. “In News Feed, we mostly show you content from people and pages you’re connected to. We can rank this better with the algorithm improvement (using AI), but the really big improvement from AI will be when we can understand all the other content that’s out there so we can help you discover much more of what matters to you beyond just what friends are up to.”
The company will additionally focus on helping its user base to join “meaningful” groups that they might find interesting. Zuckerberg added that AI will play an important role in suggesting the right Facebook groups to the right user. “And in the six months after we started working on this, we’ve already helped 50% more people join meaningful communities than before — but we have a lot more to do here,” he added. Currently, there is more than 100 million Facebook user who are active on Groups, and the company might look to grow this base to engage and retain users better.
It is also working on providing better administrative control for group administrators: “Last month, we launched new tools for group admins — making it easier for them to get insights into who their members are, filter member requests, and remove bad actors and their content quickly to keep a positive and safe environment,” Zuckerberg added.
Financials and other metrics
- Overall income from operations was $4.40 billion during Q2 2017, up 61% YoY.
- Net Income (Profits) stood at $3.89 billion during the quarter, up 71% YoY.
- Overall ARPU was $4.73 for the quarter, up from $3.82 in the same quarter last year.
- Daily active users (DAUs) – 1.32 billion for June 2017, an increase of 36.8% YoY
- Monthly active users (MAUs) – 2 billion as of June 2017, an increase of 34.6% YoY