Internet ads represent one of the fastest-growing industries in the entire technology sector. The business has changed radically in the last few years, showing average revenue growth of around 15%. This fast growth is due to the increased usage of handheld devices. As users spend more time online with their smartphones and tablets, leading online advertisers Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG) and Yahoo! Inc. (NASDAQ:YHOO) must now find new ways convert this handheld audience into revenues.
You can glimpse of how well each company’s doing at attracting mobile users through their quarterly numbers. When Facebook Inc (NASDAQ:FB) reported its earnings last week, Wall Street focused on the effectiveness of its mobile advertising. The market was expecting Facebook to continue its strong earnings record by reporting $0.13 per share in net income, on revenues of $1.44 billion.
Facebook Inc (NASDAQ:FB) didn’t entirely beat that prediction, but it did roughly meet it, with EPS of $0.12 and a surprising $1.46 billion in revenue — a phenomenal 38% top-line increase year over year, thanks to continued improvements in mobile monetization.
In the last few months, Facebook Inc (NASDAQ:FB) has introduced a number of new mobile advertisement products. A recent report discusses Facebook’s attempts to develop new products by leveraging consumer preference data from partners, which lets the company deliver more targeted and focused advertisements. Its mobile revenue grew to $375 million in the first three months of this year, and it now accounts for nearly 30% of Facebook’s total revenues — up from its 23% contribution in the prior-year quarter.
The mobile advertisement arena is becoming increasingly competitive. Yahoo! Inc. (NASDAQ:YHOO) and Facebook Inc (NASDAQ:FB) rely primarily on display ads, while Google Inc (NASDAQ:GOOG)’s main strength is its search revenue. Google Inc (NASDAQ:GOOG) has also developed the world’s most widely used mobile OS, Android, which gives the search giant a long term edge when it comes to mobile monetization.
The game-changer in this space has been Google Inc (NASDAQ:GOOG)’s YouTube, which is showing an annual revenue run rate of $5 billion, according to the company’s most recent quarterly report. YouTube gives Google Inc (NASDAQ:GOOG) a natural platform to branch out from text-based, search-driven ads to more luctrative display ads.
Meanwhile, Yahoo! Inc. (NASDAQ:YHOO) is also trying to turn around its falling revenue trajectory by overhauling its entire homepage and focusing on generating more engaging content. New CEO Marissa Mayer has led an effective overhaul of the company, resulting in 66% appreciation of the stock in the last year alone.