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Facebook’s mobile success heavily focused on apps over Web

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A recent Facebook sponsored ad

Facebook delivered its strongest year-over-year growth in advertising in three years during the first quarter of 2014 as the social networking giant sees ongoing success in mobile, which represented 59 percent of its advertising revenue during the first quarter, up from 53 percent in the previous quarter.

While Facebook’s quarterly financial results released yesterday made it clear that its winning streak in mobile is continuing, Apple – which also released quarterly financial results after the markets closed yesterday – put in another lackluster performance. For Facebook, app install ads are one important part of its success on mobile to date while its own apps, such as Messenger, Instagram and Paper are a key focus of future growth.

“On mobile, app installs have been one of our best performing ad products, driving over 350 million installs to date” said Mark Zuckerberg, CEO of Facebook, Menlo Park, CA, in a conference call with analysts to discuss the results. “Over 60 percent of the top grossing apps on the Apple App Store and Google Play use mobile app ads, which is a pretty impressive performance for a product that launched in January of last year.”

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App happy
Facebook reported yesterday overall advertising revenue totaled $2.27 billion during the first quarter, up 82 percent year over year.

The social networking giant also continues to see significant growth in mobile use, with the number of mobile daily active users up 43 percent for a total of 609 million while the number of monthly active users totaled 1.01 billion, up 34 percent. The growth rates on desktop were smaller, coming in at 21 percent and 15 percent, respectively.

Going forward, the company will focus on its own apps, including Paper, Messenger, Instagram and WhatsApp, once the deal to acquire it is finalized.


Facebook's Paper app

Facebook sees apps as an important strategy for growth, both through acquiring new users and through monetization, although revenue-generating opportunities may be further down the road for some of its newer apps.

What’s up
During the first quarter, Facebook acquired mobile messaging app WhatsApp for $19 billion.

This was an important move for Facebook as there are signs that it is losing favor among the important teenage demographic. WhatsApp, which is a robust messaging app, has been growing quickly, especially among younger users, and could help Facebook address this weakness.

This week, WhatsApp announced that it now has 500 million active users who are sharing 700 million photos and 100 million videos every day.

However, the acquisition is not expected to have much of an impact on Facebook’s monetization strategy this year, with part of WhatsApp’s popularity attributable to its promise to users of no ads.

Auto-play video ads
The other big news for Facebook is that its auto-play video ads appear to be working. This is good news because video ads will give Facebook a more direct play for the big dollars brands pour into television advertising, with approximately 90 million to 100 million people using Facebook during prime-time TV hours, according to Sterne Agee.

Facebook continues to test auto-play video ads with additional advertisers and is expected to gradually roll them out throughout the year.

According to recent data from Adobe, video ad and post replays are up 785 percent year-over-year with 25 percent higher engagement rates across "Likes," comments and shares.

Sterne Agee analyst Arvind Bhatia expects video ads could represent as much as 5 percent to 10 percent of Facebook’s advertising dollars in 2014, depending on how aggressively they are rolled out.

Apple’s shine dulls
The big story around Apple is the growing frustration in the investment community with lackluster sales and a perceived lack of the kind of innovation the company was once known for.

Apple did not introduce any new products during the quarter.


IPad sales are slipping

The expectation is that Apple will make a payments play soon and that it will introduce a smart watch and a phone with a bigger screen this year. While a payments strategy could be significant given the size of the iOS universe, the product introductions – when and if they happen – are more me-too than innovative.

Apple reported earnings of $10.2 billion during its fiscal second quarter. Total revenue reached $45.6 billion.

Apple sold 43.7 million iPhones during the quarter, representing a 34.7 percent quarter-over-quarter increase. IPads generated 16.3 million sales, and the company sold 4.1 million Mac desktop computers.

The number of iPhone unit sales increased 17 percent quarter-over-quarter while iPad sales slipped 16 percent, representative of the growth in other tablets running on other operating systems in the past year.

With iPad sales slipping, the importance of the iPhone to Apple’s position in the market is growing.

“IPhone was key in driving our stronger-than-expected results,” said Tim Cook, CEO of Apple, Cupertino, CA, during a conference call with analysts to discuss the results.

“We sold almost 44 million iPhones, setting a new March quarter record,” he said.

“These strong results were broad-based, both from a product point-of-view with demand for each of our iPhones stronger than its predecessor and from a geographic standpoint.”

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York

Associate Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at chantal@mobilemarketer.com.

 
Related content: Social networks, Facebook, Apple, Mark Zuckerberg, social networks, mobile advertising, mobile marketing, mobile

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