Why mobile platforms are an important revenue driver for Facebook

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Why improving ad relevancy is driving growth at Facebook (Part 2 of 6)

(Continued from Part 1)

Mobile platforms now constitute 62% of Facebook’s overall ad revenue

In the previous part of this series, we discussed Facebook’s (FB) better-than-expected 2Q14 earnings. We saw that the company’s earnings growth was driven by some of its new initiatives during the quarter. We also touched upon the continued shift towards mobile platforms as one of the factors driving growth at Facebook.

In the last quarter, ad revenues from mobile devices for Facebook increased 151% year-over-year. This was more than double the overall advertising revenue growth at the company. Mobile ad revenue made up 62% of the company’s overall ad revenue in the second quarter, compared to 41% of overall ad revenue in the corresponding quarter a year ago.

Facebook’s going strong in the mobile ad revenue market

According to eMarketer and as the chart above shows, Facebook’s share of global mobile advertising revenue could increase from just 5% in 2012 to about 22% in 2014. Meanwhile Google’s (GOOGL) share could decline from 53% in 2012 to 47% by 2014. Even Twitter’s (TWTR) share could increase from 1.5% in 2012 to 2.6% in 2014, while Pandora’s, YP’s, and Millenial Media’s (MM) shares are expected to decline.

As you saw above, Facebook’s mobile ad revenues grew 151% in the last quarter. This is certainly helping the company gain share in this market.

Mobile-app install ads are becoming a growing business for Facebook

Mobile-app install ads are the ads that encourage people using Facebook apps to install other apps.

During the conference call to announce Facebook’s 1Q14 earnings, management explained that app installs have been one of Facebook’s best-performing ad products, driving over 350 million installs to date. Facebook launched this product in January 2013.

This type of ad has seen a lot of uptake. Over 60% of the top-grossing apps on Apple’s (AAPL) App Store and Google’s Play Store use mobile-app install ads.

Continue to Part 3

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