Revenues from mobile advertising accounted for 23% of the social network’s total advertising revenues, compared to 14% in the previous quarter. This solid progress should be applauded, as a key challenge for Facebook has been how to monetize its mobile user base, particularly as an increasing number of users interact with the platform by this means alone.
Facebook also promised to monetize its new Graph Search feature, setting the agenda for new ways to drive future growth. But there were aspects of its results that were less positive, most notably the way high costs have eroded profits, a trend that Facebook does not expect to lessen in the short term.
The critical role of mobile in Facebook’s growth
Facebook CEO Mark Zuckerberg opened the company’s 4Q12 results briefing by announcing that in 2012 the social network “connected over a billion people and became a mobile company.” The company has worked hard to extend its reach and engagement with consumers through mobile. This work seems to have paid off, as the company claims that more people now access the social network on a daily basis via mobile than the desktop.
Facebook reported 680 million mobile monthly active users (MAUs) in 4Q12, a significant portion of its total of 1.06 billion MAUs. Moreover, of those 680 million mobile MAUs, 157 million were exclusively mobile. This compares to 432 million mobile MAUs in 4Q11, of which 58 million were mobile-only users. The problem for Facebook with this scenario, and one that was under the spotlight during its IPO, is how to monetize its mobile user base. The danger is that the company’s core online advertising revenues will decline as more users migrate to mobile, and in the past it seemed to lack a solid business model to support this transition and capture mobile advertising dollars.
But Facebook’s 4Q12 results indicate that it has addressed this problem. Mobile advertising contributed $306 million to Facebook’s total advertising revenues of $1.33 billion. This is the first time the company has broken out its mobile advertising figures, which is a sure sign of its confidence in this area. Mobile news feeds with sponsored story advertising are doing particularly well, and 65% of Facebook’s advertisers now buy their ads in this way. Facebook also revealed that Walmart delivered 50 million mobile ads over Thanksgiving weekend.