Mobile ads boost Facebook to big second quarter
Tech firm continues to fine tune messaging app
MENLO PARK >> Facebook isn’t having any trouble selling ads on News Feed, but the tech firm also wants to shine a spotlight on its other products such as video and messaging.
Fueled by mobile ad dollars, the company reported second-quarter earnings and revenue on Wednesday that beat Wall Street’s expectations.
“Many people have been expecting that Facebook’s revenue growth would start to decline because the News Feed is running out of space to show advertising,” said Debra Aho Williamson, an analyst with eMarketer. “So far, I think Facebook has been able to balance that with things like Instagram, video advertising, and soon, Messenger.”
The tech firm started rolling out ads within its messaging app, which appear below the chat threads in the home tab of the app, to marketers worldwide this month. But Facebook executives emphasized during a conference call after the earnings were released that ads on Messenger are still in their early days.
The tech firm also has to tread carefully because showing too many or lowquality ads could drive users away from its messaging app. Unlike Instagram, Messenger doesn’t have a feed that displays posts from friends and family.
“This is one of the rare times in business where you can look at messaging platforms that exist and see how they’ve successfully monetized in other parts of the world and have that be a floor. I think that over time, we should be able to do better,” said Facebook CEO and co-founder Mark Zuckerberg, during a conference call with analysts.
While displaying ads in its messaging apps is part of the tech firm’s long-term growth plan, Zuckerberg also said that he thinks video advertising will be the bigger driver of the tech firm’s business.
From April through June, Facebook earned $1.32 per share, above the $1.13 per share that analysts surveyed by Bloomberg expected.
The company, which
makes most of its money through advertising, grew its revenue by 45 percent to $9.32 billion during the second quarter, surpassing the $9.20 billion projected.
Meanwhile, Facebook continues to attract more users. As of June, Facebook had 2.01 billion monthly users, up 17 percent compared to the same period last year, and 1.32 billion daily active users. Facebook-owned WhatsApp also announced it reached 1 billion daily active users on Wednesday.
The tech firm reported a net profit of $3.89 billion in the second quarter, up 71 percent from the year-earlier period.
Facebook’s shares rose about 4.5 percent in after-hours trading, to a record high of $173.05 per share, before giving back some of those gains.
While Facebook’s revenue continues to grow, Facebook Chief Financial Officer David Wehner said the company still expects the rate of growth will slow down because it’s reaching the limit of ads it can show on News Feed and expects a decline in desktop ads. The company’s efforts to get more people to spend more time watching video could also impact how often an ad is viewed.
“We do not see our early efforts in Messenger monetization offsetting the factors that I just mentioned,” Wehner said.
Still, the tech firm has been investing in virtual and augmented reality, video, internet-beaming drones and more.
As of June, Facebook had 20,658 workers, up 43 percent from the same period last year.