Wednesday's earnings report from Facebook was largely positive. All the right numbers were going up – revenue was up by 60 percent since last year, with profits reaching $425m – and investors were pleased with most areas.
However, the customary Q&A conference call between Facebook executives and financial analysts highlighted the terror facing executives in making sure the firm continues to rake in the cash and providing a good user experience.
V3 takes a look at that and other interesting snippets of Facebook insight we gleaned from its financial results to see what challenges lie ahead.
Around one in every 20 posts in any given Facebook News Feed will be an advert. They come in the form of sponsored posts and recommended pages, and differ to the standard column of adverts on the right-hand side of the page as they appear amongst status updates and photos from friends (see below).
That one in 20 figure has remained fairly static in recent quarters, prompting analysts to ask multiple questions about "ad loading". Essentially, they want more ads to be displayed to users so Facebook can not only make more money, but please advertisers in an increasingly competitive space.
The problems for Facebook are twofold. The first problem is they've already struck a definite balance between user experience and advertising. User uproar over advertising is not uncommon and the firm risks alienating its members if it begins to bombard them with a greater number of less relevant ads.
That's where the second problem lies. If it refuses to increase the amount of ads it shows, Facebook will need to prove it has the ability to instead add value to the adverts themselves. This could be done by using more location-based data or making use of the vast swathes of information it holds on its 1.19 billion monthly active users.
Much like the adage that humans use a fraction of their brain power, it is widely believed that Facebook is only using a tiny proportion of the data it holds on users to provide relevant adverts. This is a good problem to have, however, as it leaves a lot of room for improvement on an already lucrative business.
Facebook's chief financial officer David Ebersman gave a balanced answer when pressed as to whether the firm would increase the ads shown to users: "Obviously, if we can drive more engagement that provides more opportunity for us to show more ads,"
Facebook added 55 million monthly active mobile app users in the last three months bringing the total to 874 million, and mobile app usage has jumped by more than 50 percent in the last year.
Furthermore, 49 percent of Facebook's ad revenue now comes from mobile apps. Analysts will be pleased to see this is the case, as the general view is that mobile apps are the way the industry is heading.
As the traditional PC and laptop markets continue their gradual descent, mobile app-based services will continue to rise and cashing in on that burgeoning market is key.
With almost a billion dollars of revenue coming from mobile ads, it's safe to say Facebook is doing a good job of securing its mobile future.
The rate of growth for Facebook among US teenagers has tapered off. That's not to say high-value teens are running away from the service, it's more a picture of impending market saturation. If Facebook begins to lose users, the situation will be very different – market analysts are watching very closely. The general view now is that the inertia produced by storing one's entire life story on Facebook makes it very hard to quit.
The wider effect of market saturation is that Facebook now has to work hard on attracting members in the developing world. US teens are the firm's most valuable assets, but they cannot be relied upon any longer. Not only will the firm have to attract the users, it needs advertisers to market these users to.
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