Dive Brief:
- The social network giant Facebook logged adjusted second-quarter earnings of 50 cents per share on revenue of $4.04 billion, compared to expectations for 47 cents per share on revenue of $3.99 billion.
- Facebook's quarterly figures mark a 39% revenue increase over the same period last year, and 43% more advertising revenue compared with a year ago, which reflects how more big brands are spending to advertise on the social site.
- Still, the stock sunk as much as 5% in extended trade following the earnings news on Wednesday before bouncing back from negative territory. The stock was slightly down in pre-market trade Thursday.
Dive Insight:
The Menlo Park, Calif.-based social network posted a 39% hike in revenue, but expenses also rose (total spending jumped 82%), outpacing revenue growth. Facebook reported 1.49 billion monthly active users (MAUs), beating estimates calling for 1.48 billion; daily active users (DAUs) of 968 million also exceeded projections of 962 million.
The revenue spike indicates both an increase in ad spending from brands across Facebook's platforms, as well as a rosy return on the social media network's focus on and investment in mobile apps and ad features. In April, eMarketer estimated that Facebook global ad spending would spike 35% to $15.5 billion this year, and mobile ad revenues worldwide would increase 48.8% to $11.01 billion in 2015. Mobile advertising now accounts for 76% of Facebook's ad revenues, up from 62% the previous year.
"This was another strong quarter for our community," Mark Zuckerberg, Facebook founder and CEO, said in a release statement. "Engagement across our family of apps keeps growing, and we remain focused on improving the quality of our services."
The social media site told investors as early as last fall and again in April that expenses would rise this year as the company continues revs up investments in data centers and virtual reality initiatives, among other plans including ad product updates.
Facebook has recently put a huge emphasis on video, such as making video more prominent in the news feed and changes as to how advertisers are charged for video ads. The social network also altered how it shares video ad revenue with video partners in an effort to attract bigger brands to the platform. Facebook knows advertisers come to the site to drive business, so they updated their definition of cost-per-click (CPC) in order to "help advertisers better understand how their ads perform against their objective."
During the earnings conference call, COO Sheryl Sandberg touted Facebook's video ad offerings, specifically in mobile, saying, "We believe we have best performing mobile ad product in the market, and video is making it even better." Sandberg did not give specific insights into gains in those areas, but did say that strong demand for video advertising drove Facebook's revenue growth.
Questions linger about how Facebook plans to monetize messaging service WhatsApp, particularly as it develops ad revenue streams on photo-sharing app Instagram. The photo platform has been testing fresh ad formats and buying through its API, and will roll out advertising to all marketers this fall. And, Sandberg mentioned in the earnings call "buy buttons" coming soon to Instagram as part of a greater ad push on the photo platform. By 2017, Instagram is expected to pull in $2.81 billion in global mobile ad revenue, surpassing Google and Twitter in U.S. display mobile ad revenue, according to eMarketer.
If Facebook continues to expand its social reach -- on the earnings call Zuckerberg said 1.3 billion people now use Facebook on mobile -- marketers are likely to continue contributing to the uptick in ad spending on the site. Sandberg emphasized a focus on metrics data as an "important investment" and "key priority."
“It’s important for our business to connect online marketing with business outcomes," Sandberg said.
