- $2.91 billion in revenue (a 61% increase); $791 million in net income
- $2.68 billion in revenue from advertising (a 67% increase)
- Mobile advertising accounts for 62% of advertising revenue (up from 59% in 2014 Q1 and 41% in 2013 Q2)
Remember concerns about Facebook arriving late to the mobile advertising party two years ago? How quickly sentiments can change. Here's Reed Albergotti's Wall Street Journal (WSJ) video review of Facebook's Q2 2014 financial performance:
I've reviewed numerous articles explaining how and why Facebook continues transforming and reinventing itself under Mark Zuckerberg's visionary leadership:
- eMarketer's July 2014 research on global net mobile Internet ad revenues
- Austin Carr's June 2014 Fast Company article on Facebook's / Zuckerberg's Corporate Strategy
- Mark Zuckerberg's July 2014 WSJ article on making the Internet accessible to everyone
- Reed Albergotti's WSJ article on key areas to watch in Facebook's 2014 Q2 earnings
- Josh Constine's July 2014 TechCrunch article on Facebook's Buy Button Testing
Noticeable patterns / themes in these articles give clues to Facebook's and Zuckerberg's long term corporate strategy.
- Facebook's (and others') future global growth requires investment in global wireless infrastructure
- Mobile applications will continue driving Facebook's capabilities
- Strategic acquisitions are for building future (even moonshot) competitive advantages
- When you're big, innovation doesn't come as easily as before (even for Facebook)
- Proving digital marketing delivers positive ROI is a key strategy driver
Here's my take on the Mark Zuckerberg / Facebook 5-Point Plan for Future Growth and Mobile Dominance:
1. Bring Internet Access to the Other Two-Thirds of the World
Zuckerberg described in his July 2014 WSJ article how roughly 2.7 billion people currently have Internet access. That sounds like a lot, but the majority of the world lacks connectivity. He knows Facebook's future growth is tied to increasing and sustainable investment in wireless infrastructure. The phrase "a rising tide lifts all boats" takes on significant implications not only for Facebook but also for its competitors.
Here are some key quotes from his article:
"Bringing the other two-thirds of the world online will enable them to invent and create new things that benefit us, too."
"Not only do the vast majority of people have no access to the Internet, but even more surprisingly, Internet adoption is growing by less than 9% each year. That's very slow considering how early we are in its development and that rate is only slowing further."
"The challenge for our industry will be to develop models for Internet access that make data more affordable while enabling mobile operators to continue growing and investing in a sustainable way. Efforts like Internet.org -- a global partnership founded by Facebook and other technology leaders --are already under way to solve this by working with operators to provide free basic Internet services to people."
Here's a great 2013 CNN interview with Zuckerberg describing Internet.org (my apologies for any commercials preceding the interview):
2. Make Facebook THE Killer Mobile App
Flurry (the mobile ad and analytics firm Yahoo recently acquired for $200 - $300 million) says mobile users spend 17% of their time on their phones in Facebook's app. This metric shows Facebook's mobile app is the most popular app on iOS and Android devices. Facebook's Q2 2014 Quarterly Financial Reporting slides show a consistent, steady climb in daily and monthly mobile users:
Zuckerberg knows consumers live in a mobile, one-screen world. The only screen users care about is the one in front of them. That's why Facebook's mobile apps have to deliver simple, fast, and seamless user experiences.
Based on these mobile user numbers and the percentage of Q2 2014 revenues generated from mobile advertising, Zuckerberg and Facebook nailed it. And, speaking of killer, seamless, mobile apps ...
3. Acquire Mobile Platforms (and Emerging Ones) that Increase Short Term / Long Term Competitive Advantages
In April 2012, Facebook bought Instagram for $1 billion. They recently acquired WhatsApp for $19 billion in February 2014. March 2014 marked the acquisition of Oculus VR (a virtual reality headset company) for $2 billion.
Zuckerberg views virtual reality as the next communication platform. It will be fun to track how Facebook leverages Oculus' technologies beyond gaming. Until then, here's a graphic from Austin Carr's Fast Company article showing the 700 million Instagram and WhatsApp users resulting from these acquistions:
4. Give New Innovations Time to Develop (even if patience contradicts The Hacker Way)
Zuckerberg's brainchild employees 7,000 people. Even at Facebook, creativity and innovation slowed under increasing bureaucracy and jockeying for resources (in both talent and money). Stringent metrics and timelines meant new products had little time to improve post-launch.
That's why Creative Labs is vital to Facebook's future innovations (and talent retention). Zuckerberg created it as a separate division in February 2014. It operates outside of Facebook's traditional product management processes with looser time constraints. That level of freedom and "small-team feeling" produced Paper, the mobile app for reading an responding to the News Feed.
Even Facebook "likes" innovations from skunkworks. Not a bad start to a new twist or reinvention of The Hacker Way.
5. Prove and Validate Digital Marketing Results in Positive ROI
Facebook's successful foray into Mobile App Install Ads, and the experiments it's running with the Facebook Buy Button show how simplifying the consumer buying process results in higher conversion (and that elusive digital marketing ROI).
It's mobile phone, 1-Click Shopping:
In Austin Carr's Fast Company article describing the resounding success of Facebook's mobile app install ads, developers love this advertising medium because:
- Promoted apps are no longer dependent on App Store "Top 10 popularity contents"
- These targeted newsfeed advertisements are based on a Facebook's user's history
- 1-Click shopping simplifies buying for Facebook users
- 1-Click shopping simplifies customer conversion for the advertiser
This advertising medium has resulted in 350 million app installations (Carr estimates this equates to almost $1 billion in revenue). He cites one mobile gaming CEO who invests 75% of his marketing budget in Facebook mobile install app ads because they drive $70,000 in revenues per day.
If the experiments with the Buy Button prove fruitful, Facebook can validate the ROI value of digital marketing in not only building awareness, but also in converting eCommerce sales. Here are direct quotes from the experts:
"With this step, Facebook is becoming even more firmly established as a major player in direct response advertising, and though this test is still only a test, it's a definite sign that Facebook wants to restart its efforts to become an e-commerce company as well."
"If the test is successful and rolls out, Facebook could eventually earn money on the feature by charging a fee or revenue share in exchange for processing payment and improving conversion rates. It could also use the purchases to prove return on investment to advertisers, encouraging them to buy bigger campaigns."
Mark Zuckerberg is the next Steve Jobs (along with Sergey Brin and Larry Page). I was publicly criticized for making that statement more than three years ago. He is a visionary leader. Remember how Facebook originally started out as a desktop application? That's what makes its reinvention as an industry leader and emerging pioneer in the mobile space so impressive.
And, it only took two (2) years! I can't wait to see what's next as Zuck & Company keep moving fast and breaking things.
Tony Faustino is a marketing and corporate strategist. He writes about how The Internet reinvents marketing strategy for organizations and individuals in his marketing strategy blog, Social Media ReInvention. Follow his tweets @tonyfaustino or circle him on Google+.