Yesterday it was Twitter, today it is Facebook that has beat analyst revenue estimates for the Q2 2015 earnings report. The company posted revenues of $4.04 billion and beat analyst consensus revenue estimates for the quarter by about $50 million. Earnings per share also beat estimates but relatively narrowly.
Facebook now has 1.49 billion monthly users, up 3.47 percent quarter over quarter, which was a bit slower than Q1’s 3.6 percent growth.
This is a better show considering the Q1 2015 for Facebook. Listed below are the major takeaways from Facebook Q2 2015 earnings report:
1. Mobile ads driving revenues
Like always the bulk of Q2 revenue came from advertising amounting to $3.82 billion, a small amount $215 million came from payments and other fees.
The company said that mobile ad revenue was 76 percent of total ad revenue, which was up from 62 percent a year ago.
Giving an insight on what has spiked the revenues this quarter, chief operating officer Sheryl Sandberg said video advertising has been one of the big drivers, “Our video demand is very deep. And we can do targeting in a way that is really unique. We can target millennials who like spicy food, which is really specific.”
That answers all questions why Facebook has been crazy about videos from the beginning of this year.
However, don’t expect Facebook’s revenue growth rate to crank up anytime soon was a message that was delivered by Finance Chief Dave Wehner. “The company’s advertising revenue growth, which has been driven by its mobile ads, is expected to decline “modestly” for the remainder of the year.”
He further added: “Since the first quarter of 2014, we have seen year-over-year advertising revenue growth rates decline each subsequent quarter. We expect this trend to continue in Q3 and Q4 as we continue to grow off a much larger base and face currency headwinds due to the strong dollar.”
2. Mobile driving user growth
Mobile is driving the user growth of the network - active users were 1.31 billion, up 23 percent. Daily mobile users were 844 million, a 29 percent increase, and mobile-only monthly users were 655 million.
Total monthly active users were just under 1.5 billion, which was up 13 percent year over year.
3. Revenues by geography
The company said that on average it made $2.61 in ad revenue on each user worldwide during the quarter. In the US and Canada, the figure was much higher: $8.63. Approximately 49% of revenue was generated in the US and Canada.
Facebook seems to have solved the ad revenues issue in the developing markets. We have already seen how India, from a struggling market in terms of revenues for Facebook, has turned into a positive market. The improving ARPU in the above screen grab for APAC, Rest of World is a clear indication but it is nowhere close to markets like US & Canada where user growth is stagnant.
4. Facebook Events
One of the interesting stats Facebook CEO Mark Zuckerberg revealed while running through the stats for Facebook’s family of apps (see header image), Facebook Events has hit a “global scale” with 450 million users. Besides Groups now have 850 million users.
Over time Facebook has focused on Events, it recently started sending users a morning reminder about how many Events they have coming up that day. It also just launched a portal teaching people best practices for throwing events.
Looks like a standalone app for Events is on the making like Facebook Groups.
5. More Instagram Ads
During the earnings call, chief operating officer Sheryl Sandberg disclosed plans to open up more ad inventory for marketers, as well as debut new formats, add better targeting, and introduce the option to buy ads through third-party resellers.
Sheryl didn’t give a specific timeframe for when these features will be introduced, but promised the company will move cautiously: “Our highest focus is on the consumer experience on Instagram.”
This isn’t a surprise; Facebook has been quite aggressive from the beginning of this year by providing actionable advertising features for marketers on Instagram. Analysts expected Facebook to release information about Instagram’s monetization efforts this quarter, but that didn’t happen. Unofficially, an eMarketer report released earlier this week states, Instagram is estimated to bring in $595 million in revenue this year through its display advertisements alone.
6. Monetizing Messenger and WhatsApp
Mark also discussed Facebook’s playbook for monetizing Messenger and WhatsApp in today’s call. Like how Facebook delayed ads in the News Feed in favor of first allowing voluntary interactions with business Pages, Facebook wants people to connect organically to businesses over chat before it lets companies pay to reach customers.
Here’s how Mark laid out the plan:
“If you go back to 2006 and 2007, there were a lot of people that were encouraging us to just put banner ads and inorganic content into the experience” Zuckerberg said. “And what we decided was that over the long-term, the ads and monetization would perform better if there was an organic interaction between people using the product and businesses.”
Facebook is working to slowly allow users to volunteer to interact with businesses through its chat apps. With apps and games available on Messenger, Facebook is slowly rolling out Businesses On Messenger that allows users to opt to get customer support after e-commerce purchases over Messenger rather than through email.
WhatsApp already allows businesses to set up accounts that they can use to send content or marketing messages to people who connect with them.
Mark concluded the argument asking for patience from Wall Street, saying “The long-term bet is that by enabling people to have good organic interactions with businesses that will end up being a massive multiplier on the value of the monetization down the road.”
7. Virtual reality next step for Facebook
According to Facebook virtual reality is the obvious next step for the networking giant. Last year when Facebook had its shopping spree mode on, it had bought Oculus, the virtual reality startup for $2 billion. “We’re looking forward to an exciting future together, building the next computing platform and reimagining the way people communicate.”
A year later, Mark is still pretty excited and considers Immersive 3D content the obvious next big thing after video. “The reason we’re excited in this space is the continued progression of people getting richer and richer ways to share what’s on their mind. Ten years ago it was text. Now it’s mostly visual and photos, then primarily video and we’re seeing huge growth there, but that is not the end of the line. Immersive 3D content is the obvious next thing after video.”
However, he added that more interactive social applications will arrive once we have robust technology in place to experience this new kind of video.