Facebook Inc.’s focus on mobile users continues to pay off for the social media giant, and it’s lifting the fortunes of the businesses who advertise on its platform along with it, COO Sheryl Sandberg said during the company’s latest earnings call on Wednesday.
During her portion of the call, Sandberg told investors that mobile ads account for $11.4 billion (all figures USD), or approximately 89 per cent, of Facebook’s ad revenue during the fourth quarter of 2017, which ended on Dec. 31.
In fact, mobile ad revenue for the year overall grew by 56 per cent over 2016, validating the company’s investment into the platform and paving the way for its continued focus on mobile audiences, Sandberg said.
“We continue to make progress on our three priorities: helping businesses leverage the power of mobile, developing new ad products, and making our ads more relevant and effective,” she said. “Globally 70 million businesses use Facebook. We surveyed small businesses in 18 countries and 57 per cent of them are employing more people due to growth in demand since joining Facebook.”
In addition to emphasizing the mobile success of Facebook itself, Sandberg noted that an increasing number of businesses are creating profiles on photo-based subsidiary Instagram as well, with more than 25 million businesses now having Instagram profiles, up from 15 million last July.
“Instagram is a business as mobile visual shop, and we’re seeing more people seek out businesses there,” Sandberg said. “About two-thirds of the visits to Instagram business profiles are from people who don’t follow them, and this is helping bring in new customers.”
Mobile is also playing an increasingly large role in Facebook-driven retail activity, accounting for 69 per cent of online conversions on Black Friday and 64 per cent on Cyber Monday, she said, based on data from 17 markets (the company did not specify which ones).
Meanwhile, mobile-first videos represented 50 per cent of fourth-quarter video ad revenue – a substantial increase from third-quarter 2017, which it accounted for 41 per cent of video ad revenue, Sandberg said.
“We’re seeing the short form videos work well and Instagram Stories were people can watch a full-screen vertical video and swipe up to quickly learn about a product or brand,” she said. “60 per cent of these ads are viewed with sound on.”
Declining usage rates ultimately good for businesses, Zuckerberg argues
It’s important to note, however, that Facebook’s fourth-quarter results were the last to be unaffected by the much-publicized news feed changes which came into effect the week of Jan. 22, and which CEO Mark Zuckerberg said during the earnings call are likely to decrease average time spent on Facebook by five per cent.
But businesses will ultimately benefit from the drop, a likely outcome of viewers seeing fewer published articles and viral videos, Zuckerberg said.
“By focusing on meaningful interactions, I expect the time we all spend on Facebook will be more valuable, and I always believe that if we do the right thing and deliver deeper value, our community and our business will be stronger over the long-term,” he said. “It intuitively makes sense… When you care about something, you’re willing to see ads to experience it. But if you just come across a viral video then you’re more likely to skip over it if you see an ad.”
“The most important driver of our business has never been time spent by itself,” he continued. “It’s the quality of the conversations and connection. And that’s why I believe this focus on meaningful social interactions is the right one.”
Even without the changes, the company reported a usage decline in its native country: though Facebook CFO David Wehner reported a worldwide increase of 269 million daily active users during the quarter – a 14 per cent rise over the same period in 2016 – that rise was led by growth in international markets such as India, Indonesia, and Brazil. Meanwhile, in Canada and the U.S. the number of daily active users fell by 700,000 compared to the third quarter of 2017.
“We don’t see this is an ongoing trend, but we do anticipate that DAU in this region may fluctuate given the relatively high penetration level,” Wehmer said during the call.
Responding to an analyst’s question about whether the growth in Facebook’s advertising revenue was sustainable given its North American numbers, Wehmer also said the company’s executive team feels that it’s making “good progress” in its goal of providing advertisers with a greater return on investment through efforts such as “better targeting, better ad units, [and] driving better conversion.”
“The willingness of advertisers to continue to grow budgets with us I think highlights our progress,” he said. “Remember, they are optimizing at the end of the day for business results for a given dollar spent, not the impression price that we’re kind of nominally reporting here.”
Sandberg agreed.
“We have over 184 million people using Facebook every day in the U.S., which is considerably more than the Super Bowl every day on mobile alone,” she said. “We also have – we think – the best stability to target and make advertising relevant for businesses and people who see ads. We’re continuing to build the products that allow businesses to get a higher return for the dollars they spend, and allow people to see more relevant information in ads on our platform.”
Our thanks to investment research platform Seeking Alpha for the transcriptions from Facebook’s Jan. 31 Q4 earnings call.