Facebook’s Feast Can’t Last Forever; Social-Media Company Still Remains a One-Trick Advertising Pony
October 31, 2013 Leave a comment
Facebook’s Feast Can’t Last Forever
Social-Media Company Still Remains a One-Trick Advertising Pony
MIRIAM GOTTFRIED
Oct. 30, 2013 6:31 p.m. ET
What’s not to like?
Facebook FB -0.78% reported third-quarter earnings Wednesday that beat expectations. But all eyes were on its revenue, particularly the portion that came from mobile. Overall revenue rose 60% to $2.02 billion, with ad sales rising 66% to $1.8 billion. Mobile ads represented 49% of that, up from 41% in the second quarter. Facebook’s ability to manage the shift to mobile is crucial. And its ability to do so while also rapidly expanding overall revenue means it isn’t simply moving sales around.Still, Facebook admitted teen usage may be slipping, raising alarm about how fickle this key group can be. The results also underscored Facebook’s reliance on a single stream of revenue: advertising.
That isn’t a problem until mobile-ad spending catches up with the amount of time people spend on mobile. After that, Facebook will be vying for a piece of a pie that increases in size at roughly the pace of the economy.
Moreover, Facebook’s user growth is coming mainly from markets outside the U.S. where it may not be able to monetize the growth as successfully. Facebook had the same number of advertisers in Europe, the Middle East and Africa as in the U.S. But average revenue per user in the U.S. and Canada is four times than the average for other regions.
For now, Facebook’s average revenue per user is still increasing. It is difficult to think of famine in a time of plenty. But marketers feasting on mobile ads will eventually be sated.
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