Facebook Inc (NASDAQ:FB) growth is showing strong signs of gaining momentum, especially on mobile. The company crushed its estimates across the board, and its depressed stock price took off by more than 30%. The company has proven itself as a great outlet to monetize an increasingly growing mobile audience. Its mobile advertising fortunes are now only behind the Internet giant, Google Inc (NASDAQ:GOOG).
Revenue reacceleration
Facebook Inc (NASDAQ:FB) maintains healthy levels of cash at more than $10.3 billion, which enables the company to make more key strategic acquisitions. And the company is generating strong levels of operating cash flow with more than $1.3 billion in the last quarter. Facebook Inc (NASDAQ:FB)’s revenue growth rate of more than 53% in Q2 2013 has been the fastest pace in the last six quarters for the social media leader.
Users and advertisers love Facebook
Facebook Inc (NASDAQ:FB)’s monthly user base has surged to 1.15 billion at the end of 2Q13, a 21% Y/Y increase. The number of users tuning in on a daily basis increased to more than 700 million at the beginning of Q3. But the real optimism surrounding Facebook has been the company’s mobile user growth which increased a stellar 51% Y/Y to 819 million users.
Owing to the strong growth in consumers on Facebook’s platform, the company’s advertisers are digging in, bolstered by a lot of small and local businesses. The company now has more than 1 million active advertisers who utilize Facebook’s platform, data and analytics to reach out to their target customers. Advertising revenue grew by more than 15% in each geographic region.
Driving user engagement
Facebook is driving user engagement to record highs as the number of monthly users using Facebook on a daily basis has increased to 61%. Other company initiatives like hastags, and embedded posts are also helping to keep consumers engaged on Facebook’s platform. Also, the launch of video on Instagram got off to strong start with more than 5 million video uploads in the first day.
Facebook’s CEO addressed the media rumors that a rising number of social media companies are eating into user engagement levels of Facebook especially younger demographics. But Zuckerberg stated that the firm’s internal data has shown that levels are steady or increasing. Time spent on Facebook, exceeded more than 20 billion minutes per day in the month of June.
Facebook’s reliance on Zynga Inc (NASDAQ:ZNGA) has decreased substantially. King.com has been growing its gaming franchises such as Candy Crush Saga on Facebook’s platform on desktop and later on mobile, and has kept users actively engaged. The Candy Crush Saga has turned out to be the most popular game on Facebook with more than 45 million users, according to AppData.
Mobile revenue run rate stands at $2.6 billion
One of the major bright spots in Facebook’s earnings report was the company’s mobile monetization. Facebook’s advertising revenues on mobile surged to approximately $656 million in 2Q13, which is roughly 36% of Facebook’s total revenues. Facebook’s annualized mobile ad revenue run-rate was $1.5 billion in the last quarter, which jumped to $2.6 billion in 2Q13. Mark Zuckerberg stated in Facebook’s earnings call that soon he expects to have more revenue on mobile than on desktop.
Facebook mobile monetization rate is only second to Google Inc (NASDAQ:GOOG), as the search engine giant has previously stated it is earning in excess of $8 billion from mobile ads. But unlike Facebook, Google has seen a decline in the cost-per-clicks that marketers are willing to pay, in spite of seeing growth in paid-clicks. As a result, Google’s stock saw a sharp sell-off after its last quarter earnings.
Marketers are digging in; Strong reception for ad products
Facebook’s advertising growth has been spurred by the healthy levels of ROI advertisers have been receiving on the platform. The company has seen growth across its four marketing segments including direct response marketers, mobile app-install ads, local businesses and big brand advertisers. In particular, direct marketers, including e-commerce marketers, saw a big 50% Y/Y increase in ad spending.
Mobile app-install ads are also driving revenues for the company mainly from developers. And the numbers of local businesses on Facebook increased to ~18 million, and this advertiser segment is increasing their advertising budget. And lastly, brand marketers are using Facebook’s massive and engaged audience to drive awareness and ramp up sales.
In terms of ad products, Facebook increased the type and frequency of ads placed on its News Feed, and the pricing in terms of click through rates and cost-per-click remained healthy. Newsfeed ads have done exceptionally well at driving high levels of user engagement, and a significant increase in click-through rates and number of marketers, which led to larger budget allocations from advertisers. Overall ad impressions increased 43%, and the average price per ad increased 13% Y/Y. The average price per ad in the U.S. and Canada surged 40% Y/Y due to the strong performing News Feed ads.
Even though mobile usage is growing at a rapid pace, the amounts of ad spend on mobile is just 2% globally and 3% in the U.S. The company is expecting Newsfeed ads to be a solid growth driver in 2013.
Going Forward
Mark Zuckerberg wants to keep on Facebook growing its user base and connect more users especially in developing markets. He stated that the company’s longer term growth prospects would be to develop more useful information for users such as what activities users are interested in, and finding restaurants and hotels your friends have stayed in. And the company is planning to grow the presence of Instagram further, before developing a monetization strategy. In addition, Facebook’s average revenue per user in Asia and the Rest of the World is significantly behind the U.S. and Europe and should narrow the gap in the long-run.
Right now ads on Facebook make up about 5% or 1 in 20 stories on average on the News Feed, and this ratio is likely to increase in the future, as the company pushes for more revenue growth. As a result, the company is likely to see high growth rates for the foreseeable future.
The article Facebook: Firing on All Cylinders originally appeared on Fool.com.
Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Ishfaque is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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