Facebook Now Makes 84% of Its Advertising Revenue From Mobile

Company now has 1.2 billion daily users

Facebook reported strong mobile advertising revenue growth in 2016.
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In May 2012, when Facebook had its initial public offering, it was making no ad money from mobile at all. What a difference half a decade makes.

According to the company’s latest earnings released today, mobile advertising accounted for 84 percent of its 2016 fourth-quarter revenue—up from 80 percent during the same period the previous year.

Facebook’s total advertising revenue in the fourth quarter of 2016 grew to $8.63 billion, a 53 percent increase over the same period a year earlier, beating analysts’ expectations. For the entire year, the company reported $26.9 billion in advertising revenue, up 57 percent from 2015.

“When you’re talking about a growth rate that might be as high as 45 percent, I think there are plenty of publicly traded companies that would be extremely jealous of that outcome,” said Forrester analyst Melissa Parrish.

According to Facebook chief operating officer Sheryl Sandberg, the platform has continued to diversify its advertising portfolio. She said it now has 4 million paying brands, along with another 500,000 on Instagram. Sandberg said the company’s top 100 advertisers now represent just a quarter of advertising revenue, a decrease from the year before.

Facebook reported 1.23 billion daily active users as of December 2016, with 1.15 billion of those coming from mobile devices. Monthly active users also grew, increasing 17 percent to 1.86 billion, with 1.74 billion coming from mobile. That’s up 21 percent year over year.

While the company has experienced massive growth, it expects revenue growth rates to slow in 2017, which Facebook chief financial officer David Wehner said is largely because of the slowing ad load it first warned of late last year.

According to Facebook CEO Mark Zuckerberg, the company plans to continue betting on video, which he said is a “megatrend,” much like mobile has been over the past few years. On the company’s earnings call, Zuckerberg said the company is focusing on shorter content for smartphones and tablets.

Per Parrish from Forrester, investment in video products is a smart move. She said that while the company has warned of slowing ad load, successful tests for new video products could make up for sluggish revenue elsewhere.

“We’re approaching 25 percent of the world’s population; there’s going to be a ceiling,” she said of the rapid user growth the company has seen over the past several years.

According to Eric Franchi, a Facebook shareholder and co-founder of the ad-tech company Undertone, Facebook still has plenty of room for adding more features to other products such as Messenger and WhatsApp, which still largely remain untouched by advertising. (Last month, Facebook started testing ads on Messenger and Instagram Stories.)

“These earnings show monster growth, and Facebook has so many levers to pull, still,”Franchi said.