Facebook's Mobile Problem Suddenly Vanishes

by Catharine P. Taylor, Oct 26, 2012, 5:02 PM

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So, remember that thing about Facebook’s mobile problem, way back, say, six months ago?

It’s gone! Like that! Courtesy of Facebook’s Q3 earnings report, which surprised the world into actually buying the stock. The next day, it hit a high of $24 share, about 25% higher than it was before the announcement.

Here are the specifics on Q3:

• Revenue was up 954 million to $1.26 billion from a year ago, a gain of 24 %.
• Advertising revenue increased by 36 % over the same quarter last year.
• The share of advertising revenue vs. other revenue streams (consisting of people who are still, sadly, passionate about Farmville), was 86 %.
• Mobile accounted for 14 % of advertising revenue (There’s no comparative stat for the second quarter; Facebook explained it only started ramping up mobile monetization in March, so didn’t release one.)

But the money stat is one you won’t find in the earnings release. It’s the daily run rate of Newsfeed ad revenue, and what portion of that is mobile revenue. In response to a question from an analyst, Facebook CFO David Ebersman said: “We ended the third quarter with more than $4 million a day coming from feed and about three quarters of that coming from Mobile Feed.”

So, doesn’t that mean that mobile Newsfeed ads are accounting for $3 million in revenue per day – and only $1 million for desktop Newsfeed ads? Wow. My world just turned upside down -- sort of like when you turn your phone over and everything on the screen doesn’t flip with you? Anyway, mobile ads just might work after all!

Which is a good thing, because the daily active users on mobile grew to 543 million, a 67 % increase compared to a year ago at this time. In fact, as the transcript of the earnings call demonstrated, the whole call was about explaining why the world should see that growth in usage as an opportunity for Facebook, instead of a liability. One of the first things that founder Mark Zuckerberg said was: “I think our opportunity on mobile is the most misunderstood aspect of Facebook today.”

This being a fast-paced world, it’s possible that three months from now, this early success will all have been torn to shreds. Maybe we’ll discover that the reason engagement rates are allegedly so high on mobile is that there are a lot of people out there who have fat fingers and/or are really uncoordinated. You know – the new clicks-mobile-ads-by-mistake demo.

But even if that’s true, here’s one thing that has continually bothered me about complaints that Facebook can’t monetize mobile; the supposition is that other companies have figured this out, when it’s so clear they haven’t. (Unless they are hardware providers or telecommunications companies.) In fact, the market penetration of Android aside, this is even a problem for Google. When it announced last week that costs-per-click declined by 15 %, the blame was put squarely on mobile.

Hey, while you’re out stocking up on water and batteries in advance of Frankenstorm, go buy some Facebook stock!

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