Must-know: Why Facebook’s ad revenue keeps growing consistently
Facebook managed to consistently increase its ad revenue growth rate last quarter
Facebook’s (FB) revenue growth remains healthy. The company produced yet another spectacular quarter when it announced its 2Q14 earnings a few days back. As the chart below shows, Facebook’s year-over-year advertising revenue growth rate has consistently increased from 43% in Q1 2013 to 82% in Q1 2014.
Facebook’s growth rate did slow down a little in the last quarter, mainly due to larger revenue base and difficult year-over-year comparison of News Feed ads that Facebook introduced in Q1 2013. News Feed ads have significantly higher engagement, click-through rates, and price per ad compared to right-hand column ads.
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Facebook’s now focusing on driving user engagement
Facebook has started to focus on increasing user engagement, as this is an important parameter for driving ad pricing. To achieve that goal, Facebook redesigned its right-hand column in the last quarter by showing fewer but larger ads. As a result, Facebook’s price per ad increased 123% last quarter over the corresponding quarter a year ago.
Not only Facebook, but also Twitter (TWTR) and Yahoo (YHOO) have started to focus on user engagement. Twitter’s average advertising revenue per thousand timeline views doubled in the last quarter. Meanwhile, Yahoo’s new email application helped it add one minute of time spent per user per day on Apple’s (AAPL) iOS app.
Facebook’s increasing its investment in mobile platforms
User engagement on mobile platforms is highest for Google (GOOGL)—but only slightly above Facebook. According to a report from Flurry, the time mobile users spend on Google properties was 18% of overall users’ time compared to 17% for Facebook in the first quarter of 2014. Google’s properties include Google Play, YouTube, Google Search, and Gmail, to name a few.
High user engagement for Facebook on mobile platforms isn’t surprising, since Facebook managed to increase its mobile ad revenues by 151% year-over-year in the last quarter. This was more than double the overall advertising revenue growth at the company. Mobile ad revenues now contribute 62% to the company’s overall ad revenues, up from 41% in the corresponding quarter a year ago.