Gains in mobile ads, Instagram bolster Facebook profit
Facebook Inc. churned out faster-than-expected quarterly sales growth from its main social network, fuelled by continued strength in mobile video advertising.
Instagram, the company’s popular photo-sharing app, also helped second-quarter sales climb 45 per cent to US$9.3 billion, Facebook said Wednesday in a statement. Analysts projected US$9.2 billion. Mobile advertising generated 87 per cent of the company’s total advertising revenue, an increase from 84 per cent in the period a year earlier.
Facebook’s social network, now with 2.01 billion monthly active users, is steadily driving sales at a faster pace than at other technology giants. That consistency, which executives have warned may not last, funds the company’s efforts in chat applications and virtual reality, which may take years to contribute meaningfully to revenue. To keep up growth, Facebook has been heavily investing in video.
“Facebook and Google are taking virtually all the growth in digital advertising — they’re the easiest place to spend your money,” said Brian Wieser, an analyst at Pivotal Research Group.
Facebook shares gained about 1.5 per cent in extended trading after closing at US$165.61 in New York, just off the company’s record high of US$166 on Monday. The stock has increased 44 per cent this year.
The sales growth is “based on increased engagement” on Facebook and Instagram, said chief operating officer Sheryl Sandberg.
Net income rose to US$3.9 billion, or US$1.32 a share, from US$2.3 billion, or 78 cents, a year earlier.
Facebook’s video advertising business has helped drive sales for the last few quarters; now the company is getting into content, too. Facebook has funded TV-like shows and short video series for a new product set to come out in mid-August, people familiar with the matter have said. The effort will help the company gain a share of the US$70 billion television advertising market. It will also kickstart Facebook’s role as a video platform for episodic viewing, not just the viral videos that already are common, Sandberg said.
In the main Facebook news feed, the firm said it would stop increasing the frequency of ads shown to avoid turning off its users. For more ad inventory, Facebook is relying on Instagram, the photosharing application. Now with more than 700 million users, Instagram has a mature advertising business, built off of Facebook’s, and has been competing with newly public Snap Inc., the maker of Snapchat, for young audiences.
Other efforts haven’t reached that level. The company’s Messenger application is trying to make money from users’ relationships with businesses. WhatsApp, another chat app owned by Facebook, is on a similar path. Oculus, the company’s virtual reality division, has been working to make the technology popular among consumer audiences, but hasn’t yet seen widespread adoption.
The new initiatives helped boost Facebook’s costs 33 per cent to US$4.9 billion in the quarter. The company also increased its workforce 43 per cent to 20,658 as of June 30.
The revenue beat comes as chief executive Mark Zuckerberg grapples with the firm’s broader role in society amid isolationist and nationalist movements.