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Facebook posted second quarter earnings yesterday that were entirely “meh,” as one analyst we spoke to put it.But there is one silver lining: an incredible mobile advertising business that has, in a matter of weeks, been created out of thin air.
At the start of 2012, Facebook was making zero efforts to make money off of its hundreds of millions of mobile users.
Then in June, it started ramping up a new ad unit called Sponsored Stories. Sponsored Stories are ads that appear in users News Feeds, and they would be the first ads to appear in Facebook mobile aps.
Today, COO Sheryl Sandberg says these mobile ads are generating $500,000 in revenue per day – a $183 million annual run rate.
That revenue number will only grow as Facebook says it has so far been very cautious about ramping Sponsored Stories.
It’s already a big number. In fact, $183 million in mobile ad revenues would make Facebook the world’s second largest mobile ad company by revenues, after Google. Pandora and Millennial Media come close with 2011 mobile revenues above $100 million.
Facebook’s mobile user adoption rate has been equally impressive: it’s up 67% in the past year, from 325 million to 540 million. And that doesn’t include the 80 million members of Instagram, which Facebook acquired a couple months ago.
Make no mistake: mobile is the future of Facebook’s business.
During the earnings call yesterday, CEO Mark Zuckerberg said mobile users are 20% more likely to use Facebook on any given day.
He also said that Facebook is planning for a day when there are 4 billion to 5 billion people who own smartphones out there – more than own Internet-connected computers today.
Despite this, Zuckerberg also said that it does not make sense for Facebook to build its own phone. (But then, Steve Jobs once said the same thing about Apple.)