Facebook announced its second quarter 2014 earnings today, and one fact is becoming more and more obvious. Facebook is a mobile company now. It makes 62 percent of its advertising revenue on mobile, a dramatic change for a company that had no mobile ads as recently as two years ago. And of the 1.32 billion people who use Facebook each month, 399 million, roughly a third, only log in with their phones. It's important to note that Facebook's monthly user base has grown 14 percent year over year, while it's mobile user base has grown much more, at 31 percent. Users in the US spend more than 40 minutes per day on Facebook, CEO Mark Zuckerberg says.
1.32 billion people use Facebook each month, but a third only log in with their phones
Facebook reported $2.91 billion in revenue and earnings of 42 cents per share for its second quarter, beating Wall Street's expectations of $2.81 billion in revenue with earnings of 32 cents a share. Year over year Facebook's revenues were up roughly 60 percent and it's profits more than doubled. You're also worth more to Facebook than ever: worldwide, average revenue per user is $2.24, a company record. If you're American that number is $6.44, also a company record.
After dishing $19 billion on WhatsApp last quarter, Facebook has slowed its roll a bit, but is still firing on all cylinders in the mobile space. The Facebook news feed, it's primary real estate for advertising, is becoming increasingly crowded. Increasingly brands are finding their messages don't get seen by users unless they pay up. "With brands' organic reach hitting new lows, Facebook's transition from a social marketing platform to a run-of-the-mill ad seller is nearly complete," says Forrester's Melissa Parrish. "But right now it's an ad seller without many compelling branding opportunities. Putting video ads in the News Feed could solve that problem — but only if users are willing to watch the ads."
According to eMarketer, by the end of the year Facebook will represent 9.5 percent of the US digital ad market. But right now it's an ad seller without many compelling branding opportunities. Putting video ads in the News Feed could solve that problem, but only if users are willing to watch the ads. Putting ads inside other apps using the company's new Audience Network could be another interesting opportunity.
Facebook's emphasis on mobile has only been gaining momentum. Last January, Facebook for the first time saw more than half of its revenue come from mobile ads. A few months later, 59 percent of its revenue came from mobile. This month, it's 62 percent. When Facebook went public just over two years ago, the company hadn't yet made a dime from its mobile business. Two years later, the mobile Facebook feed is filled with lucrative "App Install" ads, auto-playing videos, and sponsored posts. Over one billion people use Facebook on a mobile device every month, we learned a few months ago. And the trend seems to only be getting hotter.