Divided Opinions on Facebook’s Q3 Earnings

facebook-q3-earningsThe report of Facebook’s Q3 earnings has come in, and analysts cannot seem to agree on what they mean. While some have upgraded Facebook’s stock rating, others believe that advertising on Facebook is not actually helping businesses, and that they can only continue to grow so much. Still others are looking at the numbers on mobile advertising and predicting the end of desktop advertising’s relevance. Despite analyst disagreements’ one thing does seem to be clear: the future of Facebook and other social media networks lies in mobile devices.

The Numbers

First, Facebook reported a 60% rise in their revenue for the third quarter, largely due to the success of their mobile efforts. In terms of profits, advertising rose by 66% over the past year, and 49% of the third quarter advertising revenue came from mobile. Mobile advertising rose significantly from 41% in the second quarter and 30% in the first quarter. During the third quarter, Facebook saw an 18% increase in its users, but a striking 45% increase in mobile users. Despite these increases, analysts remain divided on whether the Q3 report is positive or negative.

The Positive

On the upside, the numbers above show significant growth for Facebook. According to Adobe’s Digital Index, ads on Facebook are doing quite well. People are clicking on significantly more ads, and the ROI for advertisers has risen by 58% over the past year. Because of this, ad prices have also risen – Facebook has hiked their CPM by 120%. Furthermore, Facebook still drives about 57% of referral traffic across the web.

The Negative

On the downside, analysts see many problems with the Q3 reports. In contrast to Adobe’s report above, Forrester conducted a survey of marketers and found that they were not satisfied with social media sites overall, and they viewed Facebook as the worst of the worst. And despite the fact that Facebook drives over half of all referral traffic, this number is down from 77% – Twitter and Pinterest have taken over much of this area.

Along with analysts, executives at Facebook are even skeptical of their Q3 results. CFO David Ebersman stated that Facebook is not planning on adding to the percentage of ads that it places in the News Feed, which was a significant factor in their previous growth. Analysts agree that Facebook cannot keep growing their mobile profits at this rate forever.

The Mobile Question

With analysts arguing over whether or not ads on Facebook are actually effective and if the social network will continue to grow, Venture Beat is questioning what the rise in mobile ad revenue means for the future of desktop ads. In fact, they argue that desktop ads are poised to become irrelevant to Facebook’s bottom line in terms of profits.

While mobile ads accounted for 14% of Facebook’s ad revenue during Q3 last year, this number has jumped momentously to nearly half of all ad revenue. However, many analysts would likely disagree that desktop ads will become irrelevant, citing the fact that mobile ad profits cannot continue to grow at such a rapid rate for Facebook.

What do you think Facebook’s Q3 earnings mean for mobile vs. desktop advertising?

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Elizabeth K

Elizabeth Kent is a recent graduate with an M.A. in Women’s and Gender Studies from Brandeis University. She earned her B.A. from Smith College with a major in the Study of Women and Gender and a minor in Jewish Studies. Elizabeth recently relocated from the Boston area back to Western Massachusetts, where she spends her free time volunteering with a local non-profit organization. Elizabeth has worked as a writing tutor, archival intern, research assistant, and retail associate. Her interests include studying pop culture, kittens, and making meals with as little cooking as possible.

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