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Three Key Drivers of Facebook’s Ad Business
Image Credit  Facebook

Three Key Drivers of Facebook’s Ad Business

If you were too busy to catch Facebook’s Q4 results this week, we have put together some of the key nuggets you may find of interest.

It is no secret that the social media service has become a honey pot for buzzing marketers and brands looking to cash in on the hundreds of millions of users (consumers!) that are there for the taking, so let us take a look at just how successful the network has been.

In Q4 2013, Facebook’s total revenue was $2.59 billion, which is an increase of 63% year-over-year, compared with $1.59 billion in the fourth quarter of 2012.

Revenue from advertising was $2.34 billion; a 76% growth in advertising revenue from the same quarter last year. Approximately 53% of ad revenue came from mobile, up from approximately 23% of advertising revenue in the fourth quarter of 2012.

Yes that is more than half. And not only is this the first time Facebook mobile crossed the 50% threshold, but it is also its first billion-dollar mobile quarter.

“In fact, our Q4 mobile ad revenue of $1.25 billion was nearly as large as our total ad revenue in Q4 of last year,” a spokesman from Facebook said.

“This growth continues to be very broad-based. Total payments and other fees were $241 million for the fourth quarter of 2013.”

Naturally, Facebook’s usage continues to rapidly grow. For example, look at December 2013; its daily active users (DAUs) were 757 million on average for the month, which is an increase of 22% year-over-year.

Mobile DAUs were 556 million on average for December 2013, an increase of 49% year-over-year.

Monthly active users (MAUs) were 1.23 billion as of December 31 2013, which is an increase of 16% year-over-year. And its mobile MAUs were 945 million as of December 31 2013,  representing an increase of 39% year-over-year.

Here are some key highlights from the advertising side of the business:

Three Key Drivers of Facebook’s Ads Business:

Mobile Engagement

•Black Friday was Facebook's single-biggest mobile ad revenue day in the quarter

•When people are shopping in stores, they are on their phones, and when they are on their phones, they are on Facebook. A recent study by Millward Brown Digital showed that while shopping in-store, people who use Facebook do so at 4x the rate of any other app or search. And for those who used Facebook as a source before shopping, over half stated that it was an influential source of information while shopping in-store

Continued growth in number of marketers - across verticals, types of marketers, and geographies

•Examples: Online retailer Nomorerack used Facebook to promote its holiday deals. It hit its aggressive ROI targets and generated $8 million in revenue on Black Friday alone

•SMBs - great progress; of new SMB advertisers acquired in Q4, 72% started with either a Promoted Post or Promoted Page Likes

•Developers - mobile apps are generating very healthy revenue growth. Facebook launched mobile app install ads just over a year ago and mobile app engagement ads last quarter based on the simple idea that it could help people find and use great apps. Facebook say this is working even better than it hoped. Facebook is helping developers attract new customers and keep them engaged. The social network says it remains excited about the opportunities in this small but quickly-growing category. Last week, Facebook also announced a small test to show Facebook ads in third party mobile apps. While it will not have meaningful results for a while, it is an interesting area to explore.

•Brand marketers - Facebook is making steady progress with brand marketers, particularly in verticals like CPG. Facebook says it is helping them connect with customers in more dynamic ways, starting a small test of its new video ad product, and measuring its impact on the brands’ sales

Investment in product development – namely targeting and measurement

•Custom Audiences has been key. Partner categories;  in Q4 Facebook more than doubled the number of categories from 500 to 1,000

•Measurement; Offline Conversion Measurement capability, which has shown that the average return on ad spend for News Feed ads is 8x

Joe McCormack is CEO of social advertising optimisation and automation SaaS platform, Adquant. The company is also one of Facebook’s Preferred Marketing Developers.

McCormack said in 2013, Adquant’s customers averaged triple digit ad-spend growth on Facebook and he believes customers have been drawn to Facebook’s platform because of its ability to target an audience across multiple devices.

“The growth that we saw on our platform is in line with what Facebook announced this week,” McCormack said.

“We think this is attributable to the major improvements Facebook made to its ad platform on a monthly basis over the past year.

“Additionally, our customers are very excited about Facebook in 2014 and plan on increasing their ad investment in this upcoming year.

“We think this is the clearest sign yet that Facebook has successfully made the transition since IPO, from being in an exploratory phase where they were not yet sure where their revenues would come from, to building a robust business with a quality set of products."

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Pippa Chambers

Pippa Chambers

Freelance News Journalist at PerformanceIN - working to source the latest and breaking news in performance marketing. 

From newspapers to national B2B magazines and technology reporting, I have covered a variety of genres. NCTJ/NCE qualified.

Please email me at and follow me @PippaC1

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