Facebook Reports 63% Top-Line Growth, With Strong Gains In Revenue Per User

Facebook-Q2-gains-speedFacebook's top-line revenue surged dramatically in Q2, growing 63% year over year to $6.2 billion. Mobile ads continue to be the star of Facebook's show, comprising 84% of total advertising revenue, up from 76% at the same time last year.

The company’s costs grew much more modestly, allowing it to increase operating margin from 31% to 46%. Net income grew 186% to $2 billion for the quarter.

Facebook’s audience has been growing more slowly than revenue for some time, but Facebook reported its strongest active user growth in three years. The social network grew daily active users to 1.1 billion, up 17% year over year. Monthly active users were 1.7 billion, an increase of 15% year over year. Mobile daily and monthly active users were 91% of the total user base.

Facebook also said time spent increased by double-digit percentages year over year across its platforms. But it did not report the average time spent.

CEO Mark Zuckerberg addressed a report, originally in The Information, that the social network was seeing declines in personal sharing.

“Overall, the level of sharing is up on Facebook,” Zuckerberg said. “What we are seeing is how people are sharing is evolving as we move from desktop to mobile. You can imagine more photos on mobile cameras, and fewer long, full photo albums; [that it’s] harder to type, [but there is a] better ability to capture video.”

Because of those shifts in how people share, “we are talking about becoming video-first,” Zuckerberg said, a statement reminiscent of his decision to be mobile-first in 2012.

A key step toward becoming video-first is Facebook Live. Zuckerberg called out "Chewbacca Mom," whose Live video was viewed 160 million times. He alluded to the shootings and violence that have been captured via Live by noting that the format “[shines] a light on important moments.”

One reason Facebook has been growing revenue faster than users is that it had plenty of open space to increase ad load. It grew ad impressions 49% year over year and the price per ad 9% this quarter.

But it warned investors that there’s little room left to grow ad load without hurting the user experience. Starting in mid-2017, it will have to grow the user base and time spent in order to increase its ad load.

Or it can look to Audience Network, which allows Facebook advertisers to target its users off-site. “We continue to invest in ad tech,” COO Sheryl Sandberg said. “Audience Network is a key part of that.” Garmin used Instagram, Facebook and Audience Network for the launch of its new watch, and saw a ninefold return on ad spend, she said. On the supply side, Sandberg said Audience Network is seeing “solid adoption” from publishers.

The company also said it will report Audience Network revenue on a net basis, making it tough to gauge the percentage of revenue Facebook takes.

Facebook is juggling a number of long-term efforts, from starting to give businesses a foothold in Messenger to its virtual reality tech, Oculus.

One of those is better search functionality in Facebook. Engineers are improving the ability to find people, businesses and content via search. Down the line, Zuckerberg said, there’s an opportunity to capture intent data via Facebook search. For now, though, search engine giant Google makes more in a quarter than Facebook does in a year.

 

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