Facebook is answering an urgent mobile question. The social network's mobile ad business grew sixfold in three months and provided 14 per cent of ad sales in the third quarter. Worries remain about sustainability, cost control and competition. But for the first time, the shift by users to mobile devices seems an opportunity for Facebook rather than a threat.
Up until now, the growth of smartphones was a hulking danger for the company headed by Mark Zuckerberg. Advertisers were wary of mobile platforms. And with users spending more time reading and posting using iPhones and Android devices, Facebook's revenue growth from ads on bigger screens suffered. In the second quarter, the number of ads delivered actually decreased 2 per cent from a year earlier, even though the network added users.
It now looks as though Facebook has started to figure it out. It reported $1.1-billion (U.S.) of ad sales for the third quarter, about $150-million of that coming from mobile. And that doesn't capture how fast the business is growing. The company said on its investor call on Tuesday evening that it is taking in about $3-million a day in mobile ads that appear in users' news feeds. That's six times what it was making in June, and means smaller devices are already a $1-billion a year business.
Not that the nearly $50-billion Facebook yet has it sewn up. Mobile advertising may be growing exponentially, but it is from a low base. The recent improvements may have been the easy pickings – for example, if advertisers can't be persuaded that people on the go are worth more than desktop users, growth could quickly slow. And of course, rivals want a share of the pie. Google and Apple could use their mobile operating systems to make life harder for Facebook.
There is also the perennial problem of restraining costs. Facebook's expenses rose faster than sales in the third quarter, and the company still formally reported a loss. But Zuckerberg is finally shown signs of cracking the mobile puzzle. After the company's botched initial public offering in May and the subsequent slide in its share price, it's no wonder investors seized on a positive status report.