Facebook had a stellar Q2 2014 earnings report yesterday, posting big gains in its revenues and profits which sent its stock soaring to an all-time high.
The executive team attributed much of the company’s success to its innovative products for advertisers and small businesses, as well as continuing user growth.
Here are the relevant highlights for marketers from the earnings call:
Mobile is driving most of the ad growth:
Facebook’s revenue in Q2 from advertising was $2.68 billion, up 67% from the same time last year. Out of that 62% was attributed to mobile.That’s up from 59% in Q1 2014.
Much of this growth can be attributed to Facebook’s app install ads, which lets users immediately download advertised apps through the Facebook platform. However, Facebook COO Sheryl Sandberg was quick to mention other sources of mobile ads income on the earnings call. “Our mobile ads revenue is pretty broad based,” said Sandberg.”We have large brand advertisers, small SMBs, direct response advertisers as well as developers using our mobile ads.”
As organic reach decreases, ad prices are going up:
Despite the big growth in mobile ad revenues, the total ad impressions on mobile decreased by 25%. Facebook CFO Dave Wehner attributed this to the lower real estate ads have on mobile layouts. This means that since Facebook is showing less ads on mobile than on the desktop, it can afford to increase the average ad price, which went up a whopping 123% over last year. It also reflects how much more marketers are willing to spend on Facebook instead of trying to reach customers organically. Of course, Facebook has more than contributed to this shift by effectively killing the organic reach of Facebook Pages, forcing marketers to go for paid ads to reach an audience.
Video content will get more favorable placement in news feeds:
Although it seems that lately we can’t get any of our content to stay in people’s news feeds long enough, Facebook is rewarding some content over others.
“We’ve improved the ranking of videos in News Feed and launched new APIs to help TV and media organizations use Facebook content in their productions,” said CEO Mark Zuckerberg on the earnings call. “Public content will continue to be a growing focus for us over the coming months, and we plan to invest in building more great products and partnerships in this area.”
However, that isn’t necessarily great news for marketers. While it’s true that video and images get way more engagement than simple text updates, Zuckerberg specifically talked about video from TV and media organizations getting favorable placement. This means high reward for information and entertainment, probably less so for sponsored content.
E-commerce will be a big part of Facebook’s future:
Facebook recently started testing out a “buy” button for its display ads that would allow users to directly buy products from advertisers within the Facebook platform. On the call, Sandberg clarified that Facebook would only act as a channel, not a seller of things itself. “No one is buying from us, we’re just streamlining the process of buying from our client,” said Sandberg.
Despite stopping short of completely embracing e-commerce, Sandberg admitted that it would become a big part of the company’s strategy for marketers. “The more people discover and buy things through their mobile phones and news feeds, the more important we are in driving e-commerce,” said Sandberg. “That doesn’t mean we’re going to, or have to sell products.”
Facebook will move cautiously on video ads:
We’ve been hearing about Facebook’s video ads, but the roll out has been slow. After Facebook acquired video advertising platform LiveRail earlier this month, it was widely expected that it would use it to ramp up its video ads offerings. On the earnings call however, Zuckerberg said the company would move slow on video ads in order to make sure users got the best experience.
“The biggest thing that we want to make sure is that the quality on this is really good, and that’s going to be the same on all these different initiatives,” said Zuckerberg.
He then described the ideal way a video ad would work on the platform. “One of the reasons we’re optimistic about the [autoplay] video ad format is that if you’re scrolling through your news feed, and the content catches your eye, then it’s playing and it’s loaded and you can just easily continue watching it, or if they don’t like it, they can keep on going through it,” said Zuckerberg. “The person has complete control, so the content has to be really good and we think that’s going to be a real high quality experience.”