Why Facebook's Success in Mobile Is Just the Tip of the Iceberg
The social media juggernaut notched really strong earnings growth, thanks largely to big increases in mobile advertising revenue. Small business advertisers also played an important role in the company's successful earnings quarter, according to Sheryl Sandberg, Facebook's chief operating officer, who spoke during yesterday's earnings call.
But the company faces some pretty significant headwinds for continued growth, and that friction is worth paying attention to if your own business strategy relies heavily on mobile marketing or mobile devices.
Behind the Numbers
Here's a quick look at Facebook's year-over-year growth for the second quarter:
- Revenue increased 60 percent to $2.9 billion
- Net income in the quarter more than doubled to $791 million
- Daily active users grew 50 percent to 829 million
- Daily active mobile users grew 40 percent to 654 million
Advertising revenue, which has always driven Facebook's revenue growth, was up sharply in the quarter by 67 percent to $2.6 billion. But mobile's share of that was 62 percent, an increase of 41 percent compared to the second quarter of 2013.
While investors and Wall Street cheered the good news, sending shares up 7 percent on Thursday to $76.21 by mid-day, it's important to note that, just like Twitter, whose first quarter earnings disappointed investors and analysts, there's some evidence of consumer fatigue with the product in the U.S.
A closer look at the numbers shows that while revenue from North American users grew 54 percent year over year, it grew 74 percent in Asia over the same period. Daily active users in the North America and Europe grew a modest 10 percent year over year, while they grew 25 percent in Asia and the rest of the world.
"On average...people on Facebook in the U.S. spend around 40 minutes each day using our service, including about 1 in 5 minutes on mobile," Facebook Chief Executive and founder Mark Zuckerberg said in prepared remarks. "This is more than any other app by far, but overall, people in the U.S. spend about 9 hours per day engaging with digital media on TVs, phones and computers."
In other words, mobile is a key driver of Facebook's advertising revenue picture, but the company can clearly grow that as a market. And as the earnings picture shows, more accelerated growth can be found in non-U.S. markets. Creating stronger links between the mobile experience of the product and more popular devices might also be another key, Zuckerberg suggested.
Meanwhile, Sandberg said small businesses, particularly mobile users, played a key part in the strong earnings picture for the quarter.
"We have more than 30 million active small business pages, and over 19 million of these are active on mobile," Sandberg said in prepared remarks, adding 1.5 million of these businesses actively advertises on Facebook.