Facebook has reported its latest quarterly earnings, which show that its transition into mobile and premium inventory have had a big impact on the bottom line.
Mobile ad revenues reached $2.49 billion (ahead of analysts’ expectations), contributing to a 53% increase in total quarterly ad revenue year-over-year. Much of that growth was driven by Facebook’s core market in the U.S. and Canada, where average quarterly ad revenue per user grew from $6.03 in Q1 2014 to $9.00 this past quarter.
On an earnings call, CFO Dave Wehner said that Facebook’s average ad prices had grown 335% year-on-year, even though the total number of impressions sold had decreased by 65%.
“Similar to last quarter, these price-volume trends were primarily driven by the redesign of our right hand column ads which rolled out in the third quarter,” he said.
In 2014, Facebook made a concerted effort to move away from low-impact ad placements like its former right-rail ads, towards more high-impact premium ads like the new image-heavy ads on the right side of its interface and autoplay video ads. Part of the strategy was to decrease the overall volume of ads being sold on Facebook — driving up the scarcity and price — in return for increased quality and share of attention.
That strategy appears to have paid off. According to Facebook, average ad prices grew 92% over the last quarter alone, following the rollout of the new right rail in Q3.
Brian Weiser, senior research analyst at Pivotal Research Group, said he expected mobile ad revenue to continue to grow as more brands increase their proportional spend in the medium.
Weiser also wondered about the prospect of new video products from Facebook in an effort to capture that growing stream of marketing spend. “Management commentary on video-based ad units highlights one of the key factors driving the company’s expected growth in share of spending from large brands, which is a core segment of Facebook’s advertiser base,” he said.
“While management did not convey that it believed it necessarily required premium content to capture more video ad spending, our guess is new initiatives (perhaps a video portal akin to YouTube or Vimeo) may eventually emerge to help monetize inventory beyond existing sales activities.”
Facebook’s overall revenue of $3.85 billion for Q1 surpassed Street forecasts. Analysts expected $3.79 billion, according to Zacks Investment Research. Fourth-quarter net income was $696 million.
