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Facebook’s Advertising Business Boosted Its Revenues

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Facebook’s advertising revenues

Facebook (FB) has been relying on its advertising business to generate most of the revenues from its advertising sales. In the third quarter, Facebook’s advertising business posted revenues of $13.5 billion, which grew 33% YoY (year-over-year). Facebook’s advertising revenues contributed ~98.6% to the total revenues in the third quarter. Facebook earned $188 million from its payments and other fees in the third quarter—up ~1% from the third quarter of 2017.

Twitter (TWTR), Snap (SNAP), Yelp, and Alphabet’s (GOOGL) Google also look to advertising sales for most of their revenues. In the third quarter, Facebook’s ad sales increased 33% YoY—faster than Google’s ad sales growth of ~20.3% YoY and Twitter’s ad sales growth of ~29%.

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Emphasis on mobile advertising

Facebook is making efforts to expand its mobile advertising, which is 92% of the total advertising revenues—up from ~88% of the advertising revenues in the third quarter of 2017. The company has been investing in hiring to expand into the mobile advertising business.

Digital advertising business

Facebook and Google are competing head-to-head in the digital advertising business. However, Amazon (AMZN) is growing in the digital advertising industry. Amazon is the third-largest digital advertiser in the United States. Notably, the US digital video advertising spending is expected to exceed $22 billion by 2021—up from $13.2 billion in 2017.

Impact of the GDPR law

According to Europe’s new GDPR (General Data Protection Regulation) law on data protection and privacy, which came into effect in May, users will have more control over their online data. Companies like Facebook, Google, and Twitter, which collect users’ personal data, will have to be more transparent with the data obtained from users.

The stringent GDPR law dented Facebook’s user growth in the third quarter. Facebook’s daily and monthly average users declined by 1 million sequentially in Europe, which accounts for 24% of Facebook’s revenues, in the third quarter due to GDPR regulations.

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