Facebook’s Mobile Switch Drops The Ad Impression By 56%

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Facebook advertising income for the last three months hit US$3 billion, despite a 56% drop in ad impressions as the side effect of social network’s focus to mobile.

The social network company has revealed its Q3 fiscal results showing that ad revenues climbed by 64% year-on-year, of which 66% came from mobile ads, an increase from 49% on the previous quarter. The price per ad has increased 274% in the last 12 months.

The seismic migration to mobile, which has prompted a greater push into News Feed paid-for ads and the recent roll out of autoplay video pre-rolls, accounted for the decline in impressions. So too did the redesign of Facebook’s right-hand-column on desktop which now houses albeit larger, but fewer ad spots.

A Facebook representative explained that while consumers are moving quickly to mobile, the company believes that the advertising industry isn’t keeping up, citing the example that 25% of media time is spent on mobile, but only 11% of brand budget is being spent on what is fast becoming the first screen. Facebook simultaneously revealed however that the development of News Feed video pre-rolls on Facebook and on Instagram will remain deliberate and slow.

The 56% decline, coupled with the seemingly enormous price hike, doesn’t surprise those working in the Australian advertising business. MEC digital director Thomas Lyngsfeldt explained that the way his firm is buying inventory on Facebook is significantly different now to how it was 18 months ago.

“This allows Facebook to effectively hide the price increase. We are delivering more effective campaigns now: I can safely say that we can reach 70% of a brand’s targeted audience within two days because of the News Feed ads,” he explained.

Lyngsfeldt was also quick to point out that, despite the 274% increase, Facebook as a broadcast channel is 10 times cheaper than cost-per-thousand delivered by TV. What might cost $2m on TV here would only cost $40,000 on Facebook. Plus, you can put a frequency cap on Facebook, which is something you certainly can’t do on TV.

On the other hand, Amobee’s director for APAC Chris Levings concurred that the 56% drop in impressions is not of concern to his clients. It completely comes in line with consumers’ move to making mobile the ‘first screen’ and the fact there is less distraction with mobile, we see it as being highly efficient.

Mobile daily active users on Facebook averaged 703 million during September 2014, an increase of 39% year-on-year, while monthly active users totalled 1.35 billion in the same month, an increase of 14% year-on-year. These figures now doubt contributed to recent figures from comScore in the US which show that Google-owned video sites, namely YouTube, racked up 158m unique users in June, while Facebook clocked in 61m. Conjecture among industry leaders suggests autoplay video ads on Facebook could ultimately overtake YouTube video views in the coming year.

Overall, Facebook’s revenue rose 59% year-on-year to $3.2 billion in the third quarter. However, costs rose 41% as a consequence of the addition of 1,200 new employees, most of them through a series of acquisitions including the US$19bn deal for messaging app WhatsApp and a US$2bn buy of virtual-reality headset maker Oculus Rift. Moreover, Facebook managing director for Australia and New Zealand area, William Easton, said: “The momentum in Australia for Facebook really mirrors the global results. We are seeing increased numbers of people on the platform and there is strong demand from advertisers both large and small. Our investment in new advertising tools Atlas and Liverail, plus our recent launch of video products and Instagram ads, offer Australian marketers exciting opportunities throughout Q4 and into 2015.”