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CNBC

Facebook's over-the-top quarterly report owes a lot to the phone in your pocket

Facebook and Google takes 75 to 85 per cent of every digital advertising dollar, say digital ad executives

PUBLISHED : Thursday, 28 July, 2016, 4:32am
UPDATED : Thursday, 28 July, 2016, 1:49pm

For every baby picture posted and every soapbox rant you see on Facebook, the social platform is raking the dough in, big time. That ability to cash in on its users makes Facebook well-positioned for the future, advertising industry experts say.

The Menlo Park, California-based company just announced its second-quarter earnings, and blew Wall Street estimates out of the water. Revenue was at US$6.44 billion, up 59 per cent from last year. It beat the Thomson Reuters consensus of US$6.02 billion

Facebook's average revenue per user (ARPU) was at US$3.82, much higher than last quarter's US$3.32.

Most of that revenue stems from Facebook's dominance in mobile advertising. Mobile ad revenue hit US$5.24 billion — up 81 per cent year over year. That revenue stream now makes up 84 per cent of total ad income. Last quarter, it only accounted for 76 per cent.

"One out of every 5 mobile dollars is going to Facebook every day," said Eric Franchi, co-founder of digital advertising company Undertone. "Facebook and Google are taking 75 to 85 per cent of every digital advertising dollar."

Mobile ads are strongly considered to be the future of digital advertising, and experts believe Facebook's dominance is deep-rooted.

"Mobile is piviotal," said Galia Reichenstein, chief operating officer and head of sales at mobile ad tech company Taptica. "It's definitely become one of the cornerstones [of digital advertising] due to the huge shift to e-commerce."

Undertone's Franci said Facebook's large user base, which reached 1.17 billion monthly active users and 1.13 billion daily active users in June, makes it very appealing to advertisers.

The social media network has a large amount of data on its users, including unique information about people's daily lives including where they are and what they like doing. These insights create very targeted Facebook ads that blend naturally on the platform next to posts from family and friends.

Mobile users are especially attractive for brands because people's attention tends to be highly engaged when they are on their phones. Ads can be location-based, meaning they can be relevant to where the person is standing at that moment.

And Facebook is on a continued trajectory of mobile growth. Mobile daily active users reached 1.03 billion in June, an increase of 22 per cent year over year.

"When you combine three things — an engaging ad unit that's well integrated into the content, the ability to have scale and reach, and a platform — it makes for a great marketing opportunity," said Adam Berke, chief marketing officer of advertising technology platform AdRoll. "There are companies that have one or two of those pillars, but it's not enough. You need to bring all three together."