Facebook surprised the street with better than expected revenue and cost controls. The revenue strength came across all regions and was clearly driven by newsfeed ad pricing gains and volume on both mobile and desktop (right-rail desktop ads are decreasing rapidly as a % of rev, and, over time, could potentially even be withdrawn). The gap between time spent on mobile and ad dollars spent on mobile remain a key opportunity for FB. That is all good news.
Notably, headline engagement numbers continue to grow strongly, with [Monthly Active Users] MAU and [Daily Active Users] DAU growth in all regions. Depth of engagement also remains impressive, with DAUs as a % of MAUs rising across the board, signifying that more people are using FB more frequently (driven by mobile). Instagram announced 150mm+ MAUs. Facebook had 1.18 Bn MAUs of which 62% are DAUs. Mobile Only MAUs touched a whopping 255 Mn up 100% YoY.
With two of the top mobile services around the globe (Facebook itself and Instagram), FB continues to benefit as overall mobile time spent accelerates and gains share from other media sources. According to FB’s stats, Facebook and Instagram together have more time spent than the rest of the top 10 mobile properties combined. Importantly, as users shift their entertainment time to mobile devices, marketers should (and are starting to) follow; FB’s mobile newsfeed ad is one of the most attractive options to capture these mobile ad dollars.
Mobile app install ads have also performed well to-date, and should continue to offer meaningful contribution to growth as FB expands the product to incorporate additional actions to drive app or content engagement.
FB cited three key factors as ad revenue growth drivers in the quarter: growth in number of users, growth in overall marketer demand for ads (which can be seen in ad pricing trends), and an increase in the number of ads shared per user in the newsfeed (mostly for Web users). However, during the call, FB’s tempering of growth expectations for newsfeed ad coverage led to a swift negative investor reaction.