eMarketer’s latest report predicts the U.S. mobile advertising market to grow 77% this year to $7.29 billion. Two years ago, the mobile advertising market stood at $1.48 billion. Growth is projected to continue in the years to come, with the market estimated to be worth $27.13 billion by 2017. The segment will account for 45% of digital ad spending and 14% of total ad spending in 2017. Google should continue to dominate the market, with mobile advertising revenues growing from $3.98 billion this year to $9.29 billion by 2017. Facebook is predicted to remain the second largest ad network, with mobile revenues growing from $390.9 million in the past year to $1.86 billion by 2017. That is strong growth given that Facebook earned almost no mobile ad revenues in 2011.
In fact, when one looks at the latest results announced by Facebook (Nasdaq:FB), it is evident that mobile business is clearly one of the big drivers for the company. Q1 revenues grew 38% over the year to $1.46 billion, ahead of market expectations of $1.44 billion. EPS of $0.12 was in line with the market’s expectations.
Mobile ad revenues accounted for 30% of the network’s revenues, compared with 23% a quarter ago. Overall advertising revenues grew 43% to $1.25 billion. Among other metrics, the company ended the quarter with the number of monthly active users growing 23% over the year to 1.1 billion worldwide. Monthly mobile active users grew 54% over the year to 751 million. Daily active users grew 26% over the year to 665 million and were ahead of the Street’s expectations of 640 million. Average revenue per user grew 12% over the year to $1.35, and ad impressions grew 39% over the year. The average price per ad also grew 3% over the year.
Facebook’s Value-Added Offerings
To keep users engaged and loyal to their network, Facebook continued to launch new services. Recently, they enabled the addition of tags to Instagram. Users can now tag photos with names of friends and the friends can stream these tagged photos. As tagging has helped Facebook increase traffic for the site, they believe that ad revenues will also grow. As of now, Instagram does not have any ads, but Facebook would be looking to include that as well. Since its acquisition, Facebook has been adding features to Instagram so that it looks and feels more like Facebook. Earlier, they also added a Web presence for Instagram users so that they could access their accounts through a web browser and not necessarily a mobile device.
In view of the need for a more secure environment, Facebook is releasing Trusted Contacts. The service will act as another layer of security where users can select a few friends who will be able to verify their identities. The user will have to give five friends a personalized security code and in case their account is hacked, they will be able to log back in by providing any three out of these five secure codes.
As part of their mobile efforts, Facebook recently launched Facebook Home, a user interface for Android-based devices that makes Facebook the center of all apps on the phone. Currently available on select HTC and Samsung phones, the app takes over the home screen of the phone and shows details like the news feed, photo slideshow and status updates of their friends. The app reported 500,000 downloads within two weeks of its release in the U.S.
Facebook continued to acquire startups as part of their talent and product expansion. Earlier this month, they announced the acquisition of mobile app developer, Parse. The deal, estimated to be worth $85 million, will get Facebook into the back end of mobile app development. Parse’s services help mobile developers with data storage on the cloud, identity management and handling push notifications and run custom code in the cloud.
They also acquired mobile software startup, Osmeta, for an undisclosed sum. Osmeta does not have a product in the market, and the acquisition is expected to help Facebook acquire talent. Osmeta had 19 engineers, all of whom were alumni of tech companies such as Google, IBM Research, Yahoo Research, and VMware. The company was working on mobile technology and was developing solutions that helped an app run on multiple devices.
As part of their talent acquisition, they also acquired design agency, Hot Studio. Hot Studio’s design team consists of 114 employees and will help Facebook in the development of new tools and brands. Terms of the deal were not disclosed, but analysts estimate that this may be among one of the largest talent acquisitions made by Facebook.
Facebook’s stock is trading at $28.31 with a market capitalization of $67.17 billion. It touched a 52-week high of $45.00 in May 2012.