Facebook and Mobile Advertising – Part 2

3 months ago, I had written a post about Facebook Home and the potential of mobile advertising. I asserted that FB had the right strategy especially in terms of growing and not necessarily paying attention to satisfy investors. FB’s strategy is paying off. The additional spending in R&D focused on mobile advertising and user growth is paying “dividends”.

During Q2 2013, Facebook’s MDAU (Mobile Daily Active Users) increased approximately 10% to 460 Million users.  Monthly Active Mobile users increased to 9% – a commendable rate of growth as well. Looking at some key metrics in terms of revenues by advertising – a growth of 28% is nothing short of impressive. Breaking down the revenues further sheds more light – Revenue in US & Canada grew by 24% and EU by 19% – again commendable numbers. As the smart phone adoption speeds up in emerging markets as will adoption of social platforms and FB, which means we could see a version of convergence hypothesis in the mobile space.

But how much of this growth is actually attributable to the increase in mobile advertising? We know that 41% of the advertising revenues is directly attributable to mobile advertising. This was a result of an approximate 9% increase from the previous quarter. Do that math – (novice extrapolation of another 9%) for the next quarter and FB will have an even split in mobile advertising between desktop and mobile advertising revenues. Very promising.

So what’s next for FB? Stay the course. Keep the focus. Graph has been a welcome addition to the desktop. A scaled down functionality for mobile would be the next logical step. Essentially – FB’s strategy will need to evolve from ad impressions i.e. user adoption – to sustained FB use on mobile platforms by both businesses (pages) and users. Driving user engagement primarily via mobile should be the key focus.

I think FB is well on its way there. I would keep a close eye on FB and of course its cash balance and where the money is going in terms of R&D and SG&A expenses.

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