Ad Prices at Facebook More Than Doubled Last Quarter

Brands compete to be seen

Facebook News Feed is getting more expensive. The price of an ad on the social network more than doubled last quarter, Facebook said today after delivering second-quarter results that impressed Wall Street.

The stock reached all-time highs trading after hours, rising about 5 percent to nearly $75 a share. The big success came on ad sales that were up 67 percent year over year to $2.6 billion.

Facebook has been focused on fine-tuning its ad business with better targeting and creative tools for brands to improve the quality of the messages showing up in the News Feed, where 829 million people spend time every day. Today, Mark Zuckerberg said that the average user spends 40 minutes a day on Facebook.

The News Feed is becoming expensive territory as more users spend time on mobile devices where that’s the only advertising space. (no right-hand rail advertising on the small screen.)

The more than doubling of the cost of ad units was “driven by the shift toward mobile usage where people are shown fewer ads compared to desktop,” David Wehner, Facebook’s chief financial officer, told analysts in a call today following results.

Facebook showed 25 percent fewer ads last quarter, so the boom in revenue comes even as the number of ads decline.

Facebook has more than 1 billion mobile users and 62 percent of ad spending falls under that category—$1.66 billion last quarter.

Wehner said the company is comfortable with the mix a typical user sees of ads and friends’ content. Advertisers are finding more competition for the dwindling ad space, especially as Facebook limits the reach of their unpaid posts.

“We are seeing brands compete for people in the Facebook News Feed more than ever before,” said Jan Rezab, CEO of Socialbakers.

Also today, Facebook said that its Messenger app now has 200 million active users just like Instagram. The company said it would continue to go slow with expanding advertising on Instagram, and Zuckerberg compared Messenger’s maturity to Facebook’s in 2006 and 2007, signaling advertising opportunities there were still a ways off.

Its WhatsApp acquisition from earlier this year still has not closed, and Facebook did not address what marketing potential could arise from the new addition of that popular messaging app.

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