As it nears the 2bn user mark, Facebook’s advertising business grows 51%, but its leadership warn of a cool in growth

Facebook's advertising revenues were up 51% year-over-year in Q1 2017

Facebook’s advertising business continues to go from strength-to-strength with revenues up 51% year-over-year but the social network continues to warn of a deceleration in growth.

Total monthly active users were up 17% year-over-year hitting 1.94 billion, with advertising revenues hitting $7.9bn up 51% compared to 12 months earlier, with ads generated on mobile devices consisting of 85% of that number.

The number of ads delivered during the period was up 32% year-over-year, with revenue generated by each ad served also up by 14%, with total revenue in North America up 47% during the period and APAC registering 60% growth (see chart below).

"We had a good start to 2017," said Mark Zuckerberg, Facebook founder and chief executive officer, in a release accompanying the numbers. "We're continuing to build tools to support a strong global community."

However, it was on the social networking giant’s subsequent earnings call where its leadership addressed a number of issues, including its early tests to allow third-party verification of ad effectiveness.

Facebook chief operating officer Sheryl Sandberg was quick to underline the social network’s recent efforts to introduce third-party verification of the performance of ads on its owned and operated properties, pointing out how it was constantly exploring ways to increase its partnership.

“We constantly review our metrics and we’ve extended our metrics to increase measurement across different platforms,” she said, also highlighting its recent consent to be audited by the Media Ratings Council.

“These are important steps as we continue to build its adverting offering,” she added, citing a number of case studies that were a result of this new positioning, including one where a brand recorded a 24-point increase ad recall using an Oracle measurement tool.

Also discussing the recently introduced experiments to monetize longer form content one the social network with Ad Breaks, she further explained the social network’s opinion that metrics such as length of view and impression numbers were “merely a proxy”.

“We’re really pleased that it’s active, and we’re confident that great content will produce engagement, and that marketers will follow audiences,” said Sandberg. “But the metrics that rally matter are driving sales.”

Elsewhere on the call, Facebook’s chief financial officer David Wehner continued on a theme raised in its previous call, namely the expected deceleration in advertising growth, a trend partly driven by the growth in adblocking, plus additional economic headwinds.

During the call he said this was expected to take more of a hold during the second half of 2017, but it was something the outfit was positioning itself for appropriately.

Offering his assessment of the latest results, Brian Wieser, advertising analyst at Pivotal Research, said that despite an expected slowdown in growth the company’s ongoing expansion is substantial considering how big it already is.

"Last year, as a percentage of global digital advertising outside of China, Facebook’s $27bn in ad revenue accounted for 18% of the world’s total (which could also be characterized as 36% of non-search advertising outside of China). With growth pacing towards 40% for this year in an industry more likely to grow by ‘teens, Facebook’s share of ex-China digital advertising will undoubtedly exceed 20% this year even before accounting for gross revenues associated with Facebook Audience Network.

"The revenue growth in the quarter is all the more remarkable considering the concerns that came to light late last year around measurement issues. While the large brands who would have cared most about these issues likely account for less than a third of the company’s revenue base, the absence of any obvious impact can still be viewed favorably."

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