While Facebook’s mobile advertising business keeps growing – mobile represented a whopping 62 percent of ad revenue during the second quarter – the social network could become a victim of its own success, particularly on the application marketing front, as a growing number of competitors come out with their own, often compelling offerings.
The 62 percent of ad revenue delivered by mobile in the second quarter is up from 41 percent during the same period a year ago and from 59 percent in the first quarter of 2014. Facebook’s new mobile ad network and app install ads drive much of the mobile ad revenue but the company continues to look at ways to broaden its mobile ad business.
“When you think about our mobile ads, I do sometimes think that people think our mobile app install ads are all of the revenue or a great majority of the revenue, and they are not,” said Sheryl Sandberg, chief operating officer at Facebook, during a conference call with analyst to discuss the company’s second quarter financial results. “They are only a part of the mobile ads revenues.
“Our mobile ads revenue is broad based,” she said. “We have large brands advertisers, small, direct response advertisers as well as developers using our mobile ads.
“The mobile app install ads which are run not only by developers but also by large companies that want to get people to install apps are growing. They remain a good part of our mobile ads revenue and we are excited about the opportunities there. But we see our opportunities in mobile ads as much broader than just installing apps.”
Facebook reported yesterday that its overall revenue grew 61 percent for a total of $2.91 billion during the second quarter of 2014. Of that, $2.68 billion came from advertising, a 67 percent jump from the same period a year ago.
Growth in mobile use on Facebook continues to outpace general use, with mobile daily active user increasing 39 percent for a total of 654 million while mobile monthly active users grew 31 percent for a total of 1.07 billion.
In comparison, overall daily active users grew 19 percent for a total of 829 million and monthly active users increased 14 percent for a total of 1.32 billion.
The company also posted a 138 percent increase in net income for a total of $791 million.
App install ads
Facebook launched mobile app install ads in late 2012 and the offering quickly took off because it meet an untapped need to help developers drive app downloads. In less than two years, Facebook has driven 350 million app installs, per Fiksu.
However, Twitter recently released its mobile app promotion product suite. Fiksu is a partner, helping clients such as Groupon, Dunkin Donuts and Barnes & Noble drive app downloads from Twitter.
“Over the past 12 months, Facebook has enjoyed a leadership position with respect to performance in the app marketing space,” Craig Palli, chief strategy officer at Fiksu.
“While costs of media were often up to ten times greater on Facebook than other channels, they could command this premium because their cost per purchasing user was 28 percent better than other traffic sources, based on the strength of their segmentation tools,” he said.