By now you have undoubtedly read countless articles talking about Facebook’s recent quarter and broadly proclaiming the end is near for the social media giant. This post will focus on what is salient to the brands and retailers that leverage Facebook’s platform and try to avoid the hyperbole associated with much of what surrounds Facebook (good or bad).
To that end, here are some facts: Facebook reported quarterly revenue growth of 42% but spooked the investment community with commentary on upcoming deceleration of growth targets that were much faster than expected by many watchers.
Highlights from the quarter:
- Total revenue increased 42% from Q2 2017 (38% on a constant currency basis) to $13.2 billion.
- Mobile advertising revenue grew at 50% and accounted for 91% of total ad revenue in Q2.
- Net income increased 31% to $5.1 billion.
- Capital expenditures for the quarter more than doubled to $3.5 billion.
- Employees now number more than 30,000, which is an increase of 47%.
- Average price per ad increased 17% and ad impressions increased 21%.
- Monthly active users were 2.2 billion, up 11% from a year ago with the growth coming largely from Asia-Pacific (the U.S. and Canada, along with Europe, were essentially flat).
- Facebook also reported a new metric never used before: 2.5 billion people use at least one Facebook app each month (Facebook, Instagram, WhatsApp, Messenger).
The results generally indicated the continuing strength and engagement of the platform by users and advertisers despite all the various controversies. The questioning came in around the guidance in which Facebook indicated revenue growth would decelerate to potentially as low as the mid 20s exiting 2018 and that investments in platform security would be very significant.
One area of strength highlighted on the call was Instagram, which has now surpassed 1 billion users. Instagram thus far seems relatively immune to much of the controversy around data sharing, fake news and the like, and it continues to be an attractive choice for advertisers. Although Facebook doesn’t break out impressions by product, we would guess that a significant amount of Facebook’s 21% growth in ad impressions is coming from Instagram. Facebook made a point of calling out the effectiveness of Instagram Stories as an ad format for retailers to engage with potential customers.
While Facebook makes investments in security to shore up the long term viability of its platform, we continue to recommend that brands and retailers leverage its current capabilities as part of their advertising strategy. After all, there are only so many places you can reach an audience of this size.
