Facebook’s future looks bright: video, Audience Network and mobile are keys

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Facebook is knocking on the door of bringing in $3 billion in a single quarter — and that might just be a stepping stone.

The company announced Wednesday that Q2 was its highest-performance quarter to date, with revenues of $2.9 billion and worldwide growth in revenue-per-user. They’re just getting started.

Much of Facebook’s economic growth of late has come from mobile. The highly-touted mobile app install ad has led to more than 350 million app installs, and the ad format is moving beyond games and into retailers and consumer packaged goods verticals. CEO Mark Zuckerberg said that U.S. users spend an average of 40 minutes per day (including 1 of 5 minutes on mobile), but he wants a bigger slice of the digital media pie.

Mobile now accounts for 62 percent of Facebook’s ad revenue, and that figure could rise in the next couple years as Facebook develops more relevant and targeted video ads in concert with Audience Network — both of which are still in their infancies.

Facebook COO Sheryl Sandberg talked during Wednesday’s earnings call about the importance of mobile and video to the company’s success:

We also introduced premium autoplay video ads this year. Video on Facebook helps brands extend their TV investments by combining traditional reach focus campaigns with our unparalleled targeting abilities. Today, we run about a dozen campaigns and the early data show promising results. We’ll continue to roll this product out slowly and carefully. Similarly we’re seeing positive early demand for marketers for ads on Instagram and we’re rolling these ads outs carefully as well.

In all of this we remained focused on the transition to mobile. Our recently launched audience network lets advertisers use Facebook targeting while extending their campaign beyond Facebook. This can improve the relevance of ad peoples see both on and off Facebook and we’re encouraged by the early response.

Many Preferred Marketing Developers and ad firms saw success with Facebook ads this past quarter, and have spoken with Inside Facebook excitedly about video.

Jan Rezab, CEO of Facebook PMD Socialbakers, reacted to Facebook’s Q2 figures:

It’s the best quarter in the history of Facebook, and clearly the huge winner here is mobile with 62% of its ads revenues being there. In 1 year, there is no doubt Facebook has become a mobile advertising company.

And that’s not even taking in consideration the positive revenue impact of their biggest mobile assets – Whatsapp and Instagram, I am expecting those to be a huge influence later this year. These apps with their hundreds of millions of users will play a huge role in Facebook’s future.

We are seeing brands compete for people in the Facebook News Feed more than ever before. The time when successful Facebook marketing was measured only by fans is gone, and companies have realized they have to focus on true ROI, reach, and driving a positive impact.

Those on the inside, building their business via Facebook aren’t the only ones excited about Facebook’s potential. Investors, who were highly skeptical about Facebook’s ability to monetize on mobile early on, are now bullish on the social network’s prospects. At the close of market Wednesday, Facebook’s stock value was a robust $71.30. Thursday morning: $75.33.

Screen Shot 2014-07-24 at 11.09.29 AMHere’s a look at what Facebook can do in the future to generate more revenue:

  • Develop better video targeting options with LiveRail
  • Serve these highly targeted videos to users outside of Facebook via Audience Network
  • Make its video ads competitive with YouTube
  • Become a more serious competitor or complement to TV ad spending
  • Roll out an effective Buy button for direct response
  • Make Instagram a relevant advertising option for a wider range of companies
  • Figure out how to monetize Messenger and WhatsApp

Many of these innovations, which Facebook has been working toward, could take place over the next few quarters. Facebook has really matured as an ad platform, as agencies have said that now brands that advertised via TV spots are working Facebook into the mix. Knowing this, Facebook has added reach-and-frequency ad capabilities, just like TV networks, in an effort to speak the same language and grab some television ad budget.

Additionally, Facebook is also catering to the newer advertiser, whose pockets aren’t as deep as major retailers. Sandberg said Wednesday that there are more than 30 million small businesses with a Facebook page — 19 million have an active presence on mobile.

What Facebook has done thus far is pretty impressive, but some of the most eye-opening results may be yet to come.

Photo by Praneendra Kuver for Inside Facebook.

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