Facebook On Advertising, Monetization During 3Q Earnings Call: We’re Just Getting Started

A common theme during Facebook’s third-quarter earnings call Tuesday was the fact that many of the social network’s monetization efforts launched in the past few months, and evaluating their progress as of Sept. 30 was too soon in most cases.

Co-Founder and CEO Mark Zuckerberg stressed those points in his opening remarks, particularly pointing to the oft-mentioned concern about Facebook’s mobile revenues:

I wanted to dispel this myth that Facebook can’t make money on mobile. This may have seemed true earlier this year because we hadn’t started trying yet.

Finally, I want to switch gears and talk a bit about monetization. The most important thing to understand here is that we’re just getting started on this.

Zuckerberg also gave his take on some of Facebook’s newer advertising offerings:

We just rolled out a new product called mobile app install. Every developer wants more people to use their application. We can provide distribution to help developers increase discovery of their apps. I’m excited about this because it helps developers with one of the biggest problems they face. I’m also excited about this because it’s truly a mobile-first ad product. A lot of what the desktop Web is optimized to do, to allow you to click from page to page, just isn’t the basic behavior on mobile. On mobile, you have to install an app first, so installs are way more valuable. I’m excited to see how developers use our mobile app product.

We’ve also been rolling out Facebook Exchange and a product called custom audiences. The idea is that we want to improve our targeting capabilities so that it’s easier for marketers to reach their customers, and so our ads are relevant and interesting to people on Facebook. This will create much better experiences for everyone using our product.

I’m also excited about the Gifts launch. We’re in the early days of it. I think there’s an opportunity here to bring more commerce to Facebook over time, and Gifts is logical first step. People already send millions of birthday messages per day using Facebook, and a lot of them have asked to be able to do more. Gifts provides us with the opportunity to learn about how people buy things, and it will hopefully help us build better services in the future.

Chief Operating Officer Sheryl Sandberg chimed in about another newer Facebook ad offering, promoted posts:

Finally, we launched promoted posts, which make it easy to turn any page post into an ad. This simplicity is especially valuable for local businesses. Since launching in Q2, we have seen promoted posts from more than 300,000 pages, over 25 percent of which are new advertisers to Facebook. These new products enable marketers to achieve more of their objectives on Facebook, and, more important, by improving the targeting and quality of our ads, we also create a better experience for our users. But we know it’s not enough to roll-out new products.

Sandberg also cited Samsung Mobile USA’s campaign to promote its Galaxy S III smartphones as a success story:

Samsung Mobile USA’s experience demonstrates the value our ads deliver. Samsung used Facebook to build awareness of its new Galaxy S III smartphones, reaching 105 million people and driving a 10-point lift in brand favorability among relevant customers. Even better, it determined that customers who saw the ad bought its new phone at an 85 percent higher rate than those who didn’t. As a result, the company realized more than $129 million in sales attributable to Facebook, nearly a 13 times return on advertising spend.

A question was raised during the question-and-answer period following Facebook’s presentation about whether the social network’s focus on mobile was cannibalizing revenue from its desktop advertising products, and Sandberg said:

We’re carefully monitoring user engagement and sentiment, and we’re pleased with the results so far. We look at how users are engaging on our platform. And as we’ve increased the number of ads on news feed, we’ve been carefully monitoring that engagement. Our revenue is growing, and that means, as I discussed, that we have a lot of new clients. We also have a lot of clients and customers who are spending more with us. So we’re seeing increased revenue and increased budgets from them. Some of the revenue also is moving over from the right-hand column to news feed, and that’s part of our strategy. We are putting more emphasis on the products that are running through news feed, rolling out products because that’s where the natural ad format is for mobile.

To add one more thought on monetization on mobile versus desktop, which I think is the heart of the question: We are measuring engagement and the results from page post ads, comparing them when they’re placed on the right-hand side to those that are being placed in news feed, and comparatively, the ones in news feed that come both in mobile and desktop are eight times more engaging, and we see 10 times the ad recall. And that makes sense, because news feed is where a lot of the engagement on Facebook takes place, so by moving those promoted posts or page posts (http://allfacebook.com/qwaya-infographic-page-post-ad_b102233) into news feed, we’re increasing engagement, and results, as well.

And Chief Financial Officer David Ebersman chimed in:

I don’t think the desktop trend is a seasonal one. I think that we opened up a lot of inventory on mobile in this quarter, and so we had advertisers who shifted some spend that might’ve been on the desktop computer into mobile feeds, because our relationships with advertisers, they’re not different advertisers on two sets of devices, so I think that’s the trend you’re seeing there.

Finally, Sandberg spoke about the social advertising sector, in general:

On the questions of where advertisers are, as I said before, we are asserting that we are not TV, we are not search. We are social advertising. And I would say that our clients are in different parts of that adoption curve. We have clients who have done a lot with us. They have now increasingly, especially this year, seen the results and seen how it affects their actual in-store sales. And they really understand it, and they’re doing more and more. We had some clients who haven’t done as much and haven’t quite figured out how to do this, and I think it’s going to be a slow but steady progression. We see more people doing more and understanding how to make social ads really work for them. We’re also working hard at developing better tools. So some of the things we’re announcing and working with, if you think about custom audiences, custom audiences enables an advertiser to segment to different parts of their customer segment with different ads — that’s really improvement for making these ads perform better, as well. All the work we are doing on measuring is also really important because by measuring, we have not just proved the results to marketers, but we can get results that we can then use to improve the ads.

Readers: Do you think Facebook’s fourth-quarter earnings will better reflect all of the advertising initiatives it has introduced over the past few months?

Image courtesy of Shutterstock.

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