Facebook reported quarterly earnings yesterday and the results were in line with street expectations. However, the talk of the town was Facebook’s mobile ad business, which surged from practically nothing to account for 14 per cent of $1.1 billion in ad revenues last quarter.
Mobile ad revenues were $152 million. That’s an annualized run rate of $608 million.
Moreover, by quarter-end, News Feed ads at the core of Facebook’s mobile business were generating $4 million daily, implying an annualized run rate for Facebook’s mobile ad revenues close to $1 billion.
Amid the excitement these numbers generated, few noticed the cloud hanging over them. Facebook’s desktop revenues actually slipped. Facebook could potentially end up in the same quagmire as Google, where phenomenal growth in mobile revenues comes partially at the expense of the desktop.
Mobile may not be the revenue lifeline that many Internet giants are hoping for.
Facebook now has 604 million mobile monthly active users (MAUs), which means about 9 per cent of the global population visits Facebook’s mobile site every month. MAUs are up 61 per cent from a year ago, and 11 per cent over last quarter. Facebook generated about 25 cents for every mobile user this quarter.
As we’ve discussed, an increasing number of users are mobile-only— 126 million at the third quarter’s end. Of new mobile users added in the quarter, 39 per cent were mobile only.
As impressive as these numbers are, Facebook’s mobile success hinges on the mobile ads’ effectiveness. There is some early evidence indicating they are more effective than desktop ads, and they have been lucrative, but it takes more than five months to arrive at demonstrable conclusions.
Even more worrisome, it looks like Facebook’s core desktop ad business actually declined last quarter. Stripping out mobile ad revenues, desktop revenues were $934 million in the quarter, down from $962 million in the second quarter (we estimate, generously, that mobile ad revenues were $30 million in the second quarter).
The drop in desktop revenues is even more significant when we consider that Facebook’s ad business historically shows moderate growth— not a decline— from the second quarter to the third quarter.
Advertising may just be the beginning of Facebook’s mobile monetization efforts, but on the whole it is too early to tell whether the company’s mobile ad strategy will be the silver bullet that can solve Facebook’s revenue challenges.
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