The social media giant reported a 45% growth in ad sales, or $9.32 billion – a hefty increase from $6.43 billion in the second quarter last year – while shares rose more than 4% to about $173 in after-hours trading, exceeding analyst predictions.
The driving force behind Facebook’s recent growing power is mobile video ads, representing 87% of the entire ad sales in the last quarter and reaching nearly $8 billion.
Calling the results “extraordinary”, Rory Natkiel, head of content at Syzygy, said Facebook’s range of formats and targeting capabilities means it’s “suitable for almost any purpose, from extending the reach of a single blog post to multi-market e-commerce campaigns.”
Meanwhile, relentless work in developing its video offering (Mark Zuckerberg has stated the channel will become a core part of the businesses in the next couple of years) is drawing spend away from traditional ad channels, according to Natkiel.
“We’ve seen clients begin to shift spend away from TV and into Facebook with good, and often better, results so we only expect this growth to continue,” he said.
Relentless growth
Sebastian Redenz, director of Biddable Activation, doesn’t expect the Q2 numbers to dampen much in the third quarter as Facebook’s array of ad solutions continue to “demonstrate their value”, adding that the company has moved away from “a fluffy engagement platform reporting on Likes and Fans to a full funnel media owner reporting on ad recall and sales revenues”.
Despite the record $173 share price, Redenz sees this closer to $200 in the near future, “perhaps as soon as the end of the year as the digital advertising complex solidifies a duopoly of Google and Facebook.”
In addition to ad revenue from Facebook, with a user base now reaching 700 million, Instagram is starting to have a significant impact on the quarterlies as it continues to muscle out competitors on the market.
“Instagram is emerging as the rising star here, usurping ad spend from Twitter, and becoming the fastest growing social network, winning the war on Stories and putting Snapchat’s growth to sleep ever since,” he explained.
Redenz also noted that the integration of measurement partners such as Nielsen and Millward Brown to demonstrate effectiveness turned out to be a “successful tactical move” which gives advertisers renewed confidence following issues with measurement earlier in the year.