Facebook’s earnings confirm importance of mobile
Facebook is up a massive 26% today on the back of strong mobile-fuelled earnings in the second quarter. Having dedicated itself to becoming a more mobile-centric platform, Facebook is reaping the rewards. This is a lesson, however, to every technology company on the importance of mobile in today’s economy.
I have only brief comments on Facebook. First and foremost, I do want to stress how beaten down the stock has been. Earlier in the year in February, Facebook had traded as high as $32 a share but had dipped as low as $23 in June. Even so, the results were spectacular:
- $1.81 billion in revenue compared to estimates of $1.62 billion and $1.18 billion in Q2 2012
- $333 in net income under GAAP ($488 million non-GAAP pro forma) versus a net loss of $157 million in Q2 2012
- $1.60 billion in ad revenue, up 60% from Q2 2012
- $656 million or 41% of ad revenue from mobile, up from 30% in Q1, 23% in Q4 2012 and just 14% in Q3 2012
- 819 million active mobile users
- 699 million active daily users compared to 665 in Q1
- 1.15 billion active monthly users
- Ads are about five percent of stories in the newsfeed
Those are spectacular numbers in light of the relatively modest five percent of stories in the newsfeed that are advertising. Apparently, Sheryl Sandberg, the COO, was in charge of Facebook’s push into mobile.
Two things come up for me here. First, the huge increase in revenue tells you that the advertising dollars in mobile are there. Facebook is moving quite aggressively to take advertising share in mobile and that should scare Internet advertising king Google given that much of this revenue is money that Google could be getting. Second, that Facebook is doing mobile so aggressively tells you that mobile is where it’s at. A full 41% of their ad revenue is coming from mobile. That’s huge. ANd we should expect that share to climb over time. Now, Facebook is the perfect content for mobile users to consume. So, clearly every technology company doesn’t need to move so aggressively into this space. But these numbers are a clear sign that all technology companies need to have a big presence in the mobile space with a positive user experience if they want to stay in business. I would go so far as to say mobile is make or break. Tech companies will start to live or die based on how well they adapt to a mobile-centric world.
One last point. Matthew Ingram at GigaOm asks whether Facebook is missing something by taking the AOL ‘walled garden’ approach i.e. going closed instead of open. He notes that Facebook moved to a closed system by progressively shutting down portions of its API in order to better control its ecosystem to facilitate monetization of its users. Ingram doesn’t answer his question. But I will. Like it or not, controlled Internet platforms the world we are headed toward. All the moves at Twitter to do the same thing tell you that this is going to be the approach for many companies going forward because they want users to come to their platform in a way that they can monetize those users. An open API doesn’t allow this to happen.
Personally, I prefer open. But open means giving up revenue to others in order to build a user base. Ostensibly once the network effects of a large user base is in effect, that revenue leakage is largely unnecessary and smart companies are going to close those holes. This is what we are seeing with Facebook and Twitter in social media and I believe this trend will pervade the media ecosystem as a whole before long. That’s why paywalls are going up everywhere.
That’s my view. Here are the links.
Did Facebook miss a massive opportunity by building a walled garden instead of a truly open platform? — Tech News and Analysis
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