Facebook asserts approach to improve quality of ads, not ramp up formats

Facebook says it will look to improve the quality of its advertising offer to marketers rather than look to ramp up the amount of formats, an assertion stated as the company reported a 72 per cent increased in its first quarter revenue.

Facebook video ads
Facebook says its efforts are focused on improving the quality of its offering to marketers, not the number of ads.

Speaking on a call with analysts last night (23 April), Facebook founder and CEO Mark Zuckerberg said the company’s recent efforts have been focused on improving the relevance and quality of ads.

He added: “To do this, we’ve been working to improve the tools we provide for marketers, so they have access to better targeting capabilities, simpler ad products and more useful measurement tools…Our approach is less about developing new products for marketers and more about improving our existing ones and helping businesses to use them efficiently.”

COO Sheryl Sandberg said tools previously only available to its biggest advertisers – such as Custom Audiences and Partner Categories – are now available to all brands via its self-service platform. By making these tools more accessible, Sandberg said Facebook will grow the number of advertisers on its platform and improve their results.

Positive results have also been yielded by improvements to Facebook’s measurement tools, particularly for direct response advertisers. Sandberg said its recently launched offline conversion tools to measure in-store sales have also received a positive reaction from marketers.

Zuckerberg also reiterated Facebook’s previously stated ambition that it wants ad content to be of the same quality of organic content in the News Feed, adding: “we see we’re getting pretty close in a few countries, but we want to get to that everywhere”.

There are some new formats that Facebook is exploring introducing such as autoplay video ads, which the site is currently testing with a small group of advertisers in the US. However, Facebook said it does not expect any “meaningful contributions” from this format this year as it looks to make organic autoplay video more accepted by users on the platform first before rolling out the ad product wide.

Facebook owned Instagram, which now has more than 200 million users, is also in the early stages of offering advertising. Sandberg said a recent ad for Levi’s, feautring photos of people wearing jeans in picturesque outdoor spaces, drove a 24 point lift in ad recall – three times the control group. She added that there are no intentions to ramp up Instagram ads quickly, but rather grow it “deliberately” slowly.

Facebook’s Q1 performance

Total first quarter revenue grew 72 per cent year on year to $2.5bn, while advertising revenue rose 82 per cent to $2.27bn. The strongest driver of advertising growth was mobile ads, with mobile accounting for 59 per cent of revenue ($1.3bn)  in the period.

The average price per ad increased 118 per cent year on year, despite total impressions declining 17 per cent as users continue to shift to mobile, where Facebook serves less ads. Facebook says the increase in the price of ads was driven by more ads being shown in the News Feed, which have higher click-through rates than its right hand column ads.

Facebook’s mobile app install ads were one of its best-performing products – adding weight to the reasons Twitter and Google offered for both launching their versions of the format across their services this month. Zuckerberg said 60 per cent of the top grossing apps on the Apple App Store and Google Play have paid to use a Facebook mobile app install ad.

Despite successive revenues of strong growth, Facebook warned it will now be facing tougher year on year comparisons because of the timing of the ramp up of News Feed ads in 2013. As a result, it expects its year on year ad revenue growth rates to decline from next quarter and be “meaningfully lower” towards the end of the year.

The site now has 1.28bn users, 63 per cent of which visit the site daily. Facebook said it also reached a new milestone on mobile at 1 billion monthly active users and just over half a billion daily active users.

Average revenue per user fell slightly quarter on quarter to $2, down from $2.14. Average revenue per user in Europe dropped 17 cents to $2.44.

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