Mobile drives tripling of profit at Facebook

Advertising on mobile has driven significant revenue growth for Facebook in Q1, comprising 82% of its total ad revenue and facilitating the tripling of net income to $1.5bn.

The social media giant’s quarterly earnings highlighted an impressive 57% year-on-year growth in advertising revenues to $5.2 billion, with over 3 million active advertisers. Mobile advertising reached $4.2bn, up 75% on Q1 2015.

The growth in mobile-based advertising revenues is a result of Facebook successfully exploiting the consistent expansion of its mobile user base. The number of daily active users on mobile for Q1 2016 has nearly reached 1bn for the first time, up 24% YoY to 989 million. Monthly mobile users are also up by 21% to 1.51bn. With Facebook experiencing 1.65bn monthly users across all platforms, mobile is now the principal format by which its users connect.

That trend is only expected to continue, and Facebook COO Sheryl Sandberg says the shift to mobile is the company’s top priority for 2016.

“A big focus for us in 2016 is helping our clients understand the true business impact of their ads, especially on digital,” she said. “We’re pleased with the progress we made in Q1 across our three priorities: capitalizing on the shift to mobile; growing the number of marketers using our ad products; and making our ads more relevant and effective. Consumers have shifted to mobile, and businesses know they need to catch up.

Speaking about historical challenges facing the social media giant, founder Mark Zuckerberg pointed to the move to becoming a mobile-facing entity as a long-term objective, which appears to be paying dividends considering its successful mobile advertising business over the last quarter.

“More recently, we navigated a challenging transition to mobile,” he said on an earnings call. “But because we were a controlled company, we were able to focus on improving the user and product experience of our apps first and then build a strong mobile business over time rather than being forced to do something short sighted.”

Mobile is an increasingly important trend for Facebook, as it seeks to expand its user-base across the world with mobile access playing a pivotal role in reaching previously disconnected societies in emerging markets, such as Africa. Facebook’s Free Basics service, which zero-rates selected services and allows users with minimal income and rudimentary mobile internet access to begin utilising internet services on mobile, has now connected more than 25 million people around the world, according to Zuckerberg. Facebook’s Internet.org programme is developing an open-source telco infrastructure project called TIP (Telecom Infra Project) aimed at reducing the price point of operating mobile networks.

This concerted hardware play would appear to be an attempt by Facebook to endear itself to the mobile network operator community, which has much maligned Facebook and other over-the-top content providers for using their infrastructures at no cost. With an ever-increasing amount of its business being conducted over mobile, Facebook would do well to placate and cooperate with the operator community, particularly as it has identified video content as the biggest growing media format being consumed across its sites.

“One of the drivers of the consumer shift to mobile is video,” said COO Sandberg. “People are sharing and creating nearly three times more video on Facebook than they were a year ago. And as of February, the time people spend watching videos on Instagram increased by more than 40% over the preceding six months.”