Facebook Earnings Preview: Will Mobile Ads Finally Pay Off?


Facebook is one of a number of tech companies set to announce its second-quarter financial results this week, and its earnings are expected to be among the most closely scrutinized as its mobile strategy takes shape. The company will host a conference calls at 2pm PT on Wednesday when it will announce its results, with the proceedings set to be broadcast live on the Facebook Investor Relations website.

With regards to its mobile efforts, Facebook’s mobile ad revenues and its mobile-user numbers will both be under the spotlight, with several analysts predicting that this push will help drive double-digit revenues and earnings growth. There’s every reason to be confident – during its first quarter report, Facebook posted $1.458 billion in revenues, an increase of $1.06 billion from the year before, with earnings per share pegged at $0.12. At that time, Facebook discussed ways in which it was trying to hone its advertising techniques to make them more profitable, highlighting new methods of targeting and partner categories.

Newsfeed Ads Make a Splash


All the evidence points towards Facebook’s new advertising strategies having a positive impact. Last weekend, Adobe’s research division posted a report highlighting the effectiveness of the social media giant’s new display advertising campaign, and the results were hugely encouraging from the investor’s perspective.

Adobe’s report cites the significant impact of Facebook’s desktop newsfeed ads, those so-called ‘sponsored stories’, which – although irritating for some – have achieved click-through rates (CTR) 14 times greater than its standard right-hand side (RHS) ads. Even more encouraging however is the success of its newsfeed ads on mobile, which achieved a CTR that’s 28 times better than RHS ads, with the cost-per-click also being 42% lower. All this was achieved despite the daily impression frequency for newsfeed ads being considerably lower – by 62% on desktop and 66% on mobile – which translates to a lot more bang for advertiser’s bucks. Adobe calculates that altogether, the CTR advantage of newsfeed ads versus RHS ads is five times greater on desktop, and eight times greater on mobile.

It remains to be seen if these new ads will translate into greater profits. Inside Facebook says that we probably won’t see their true impact until Facebook posts its third quarter results later this year, but in any case it would be a big surprise if its results fell short of analysts’ expectations.

Facebook Premium Anyone?


Even if Facebook’s new ad strategy does somehow fail to translate into more $$$s, the company could have further tricks up its sleeve, perhaps by offering users a chance to pay to avoid seeing those unsightly ads. Not that Facebook has even hinted at such an idea, rather the suggestion comes from Twitter co-founder Biz Stone, who wrote on the free blogging platform Medium that though he’s finally fallen in love with the social media network, he’d gladly pay to see the back of those sponsored stories.

According to Stone, Facebook would do well to offer people the choice of paying $10 a month to get rid of those pesky ads, which in many cases totally suck:

“In general, the ads on Facebook don’t seem particularly useful or engaging. However, ads on the service are universally tolerated because that’s what makes Facebook free and free is nice. They could offer Facebook Premium. For $10 a month, people who really love Facebook (and can afford it), could see no ads. Maybe some special features too. If 10 percent of Facebook signed up, that’s $1B a month in revenue. Not too shabby.”

Admittedly it’s not really the most original idea, but it’s one that would almost certainly work. After all, pretty much every mobile phone app does something similar – offering ad-free paid versions with better features – and there’s a precedent of sorts with Apple rumored to be lining up its own premium, ad-free TV offering.