Facebook grows ad revenues by 46% as it looks to target SMEs to continue mobile and video growth

Mobile advertising represented 73% of Facebook’s $3.32bn ad revenues, which were up 46%, for the first three months of the year. However, chief operating officer Sheryl Sandberg insisted it is ‘still early days’ when it comes to harnessing mobile’ and video’s true potential to marketers.

Despite a Q1 rise in advertising revenues, there wasn’t an increase in profitability, with profits at Facebook falling 20% to $512m.

But at yesterday’s results briefing Facebook’s Chief Operating Officer (COO) Sheryl Sandberg said the introduction of a mobile ads manager during the period was part of a wider shift among marketers to video, which she said will drive future growth.

“It’s still early days but I think all marketers have the opportunity to do video and that’s pretty exciting. This includes SMEs who would never be able to hire a film crew and buy a TV ads.”

She added: “Around 30 million small business Facebook pages are continuing to grow, and we have an opportunity to turn those businesses into advertisers and marketers by building very simple ad products.

But it’s worth noting that not all of the revenue from video is incremental, because the video ads take the place of other ads that we would have served into News Feed.”

Mobile video is a key component of Facebook’s offer to advertisers, with more than 75% of its global video views occurring on mobile and the total number of video views for Facebook now hitting 4 billion a day.

One key factor for the increase in video views is because uploads to Facebook now play automatically. This is attractive to brands as a view is counted if it appears in a person’s News Feed for three seconds or more even if they don’t watch the entirety of the video.

And as Sandberg alluded to, brands are also bidding more for video as it displaces others ads in the News Feed. Although this is something that could cannibalise the adoption of other News Feed ads, admitted Facebook’s chief financial officer David Wehner.

He clarified: “If somebody’s willing to pay more for a video, it’s going to get served before another type of format ad.”

Sandberg, meanwhile, said that Facebook would start to offer more video ad opportunities on Instagram. She referenced film studio Lionsgate, which promoted the film Age of Adaline by targeting young women on Instagram with multiple video ads.

“We are capitalising on the shift to mobile as in the United States, for example, Facebook and Instagram get more than one out of every five minutes spent on mobile,” Sandberg explained.

“We expect more marketers to put mobile video at the heart of their campaigns in the future and we’re well-positioned to drive this shift.”

She said the social media giant was working hard to make sure advertising was more relevant having introduced an ad relevance score – a way for marketers to better understand how people respond to their ads – in the first quarter.

Sandberg also said there had been increased adoption of targeting tools like Custom Audiences and Conversion Tracking.

In order to improve profitability, Debra Aho Williamson, principal analyst at eMarketer, said Facebook would have to continue to strengthen its links with video advertisers.

She said: “We’re still waiting for indications of how much ad revenue Facebook is getting from Instagram, and it will be important in coming quarters for the company to start to show how much momentum it’s gaining in video advertising and off-Facebook ad targeting.”

Although Facebook’s total earnings came in at $3.54bn in the first quarter, growth has slowed. In contrast, Facebook’s total earnings accelerated to 72% growth in the first quarter of 2014, while the $3.54bn was slightly under analyst predictions of $3.56bn.

The social media platform said that it now has 2 million advertisers signed up to Facebook, with their potential audience including 1.4bn users on Facebook, 800m users on WhatsApp and 300m users on Instagram.

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