Facebook Mobile Ad Gains Forecast To Hit $6.3B, Teens Drift From Social Net

It’s no secret that Facebook refocused its ad business around mobile last year with dramatic results. By the third quarter, mobile advertising accounting for nearly half its overall ad revenue -- up from almost nothing at the start of 2012. That trend is expected to continue in 2014 as mobile becomes the greatest area of ad revenue, according to JPMorgan’s annual Nothing But 'Net report released this week.
 
Indeed, the report authored by analyst Doug Anmuth projects mobile advertising surpassed desktop advertising in the fourth quarter of 2013 and will rise to 63% of total ad dollars this year.
 
“Quite simply, mobile has moved from a headwind in 2013 to a tailwind in 2014,” he wrote. “We note that Facebook’s mobile revenue growth has been robust, despite relatively modest ad load increases, suggesting users, usage and ad-quality improvements can continue to drive strong revenue growth going forward.”
 
Anmuth noted that increasing the ad load in the Newsfeed was a key to ad growth last year, although the company indicated earlier this year that it wouldn’t ramp up advertising beyond a ratio of one ad per 20 organic posts, or 5%. Instead, future gains would come from ad-quality improvements and increased advertiser competition driving up pricing.
 
“However, we remain confident that Facebook is not stopping ad load increases, but only slowing them in its ongoing efforts to optimize the user experience -- the right thing to do over the long term, in our view,” stated the report. JPMorgan estimates that Facebook’s mobile ad revenue will more than double from last year to $6.3 billion.
 
Optimism around the company’s mobile business last year, however, was dimmed by comments from Facebook and other sources suggesting that teens were drifting away from the social network in favor of alternative platforms like Twitter and Snapchat. A Pew Research Center study on social media usage last month suggested that the use of Facebook by young adults (18-29) has plateaued.
 
The JPMorgan report concludes that the decrease in daily use by teens is limited to those 13-15, with some shifting to Facebook-owned Instagram. It notes that the company is working on improving Facebook Messenger, its own messaging app, as well as enabling direct messaging in Instagram. The investment firm believes these steps will help the company better compete with Twitter and popular messaging apps this year.
 
With ads just launched on Instagram at the end of 2013, JPMorgan expects Facebook will continue to roll out advertising slowly this year, and that the ad load over time could be lower than on the parent site. As a result, the firm doesn’t factor Instagram ad revenue into its Facebook estimates for 2014.
 
What about the most anticipated form of advertising on Facebook this year -- video?

The report gives surprisingly little focus to the rollout of video advertising, which has been subject of fervent speculation over the last year or so. The rumors turned to reality in December, when the social network announced it had launched a limited test of autoplay video ads in the mobile and desktop Newsfeed.
 
The study states that JPMorgan is “positive” on pending video ads along with other nascent ad initiatives, like Instagram monetization and FBX in the mobile Newsfeed to build demand among brand advertisers. There are no specific estimates for video ad revenue in 2014. The investment firm projects that Facebook’s overall revenue, however, will grow 42.5% to $10.7 billion from an estimated $7.6 billion last year. That rate would mark a modest decline from 49.4% in 2013.
 
Not everyone is as bullish on Facebook’s fortunes this year. Augie Ray, a former Forrester analyst and director, global voice of customer strategy at American Express, recently wrote a mock “2014 in Review” blog post recounting Facebook’s "Very Bad Year.” In it, he muses the social network suffered from a stagnant user base, slowing ad growth and a lack of revenue diversification beyond advertising.
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2 comments about "Facebook Mobile Ad Gains Forecast To Hit $6.3B, Teens Drift From Social Net".
  1. Anni Paul from BoscoSystems , January 12, 2014 at 12:50 p.m.
    Facebook will find a way to reach teens again, probably through their more aggressive focus on social gaming. And once they come back, FB's ads are starting to look so good (they've obviously taken a page from the creative things we've seen from Airpush and Tapjoy) Facebook will have no problem making mobile ads impactful for advertisers down the road. I'm not worried about Facebook one bit.
  2. Howard Zoss from Zig Marketing , January 13, 2014 at 2:22 p.m.
    The winds of change do not bode well for the long term for Facebook .. still the behemoth, it will do very well with the shift to mobile and it has the scale. However, all giants eventually crumble as media proliferation escalates dramatically. There will be no "next big thing" in the social space ... there will be many smaller things. Overtime like AOL, Yahoo, MySpace, it will lose its energy and standing as the Millennial generation rolls out to thousands of other mobile/social technologies in the future.