Facebook, once again, reported financial results that beat investors’ expectations on virtually every metric – and the stock responded by jumping by more than 5% to a fresh all-time high!
What does this mean?
Facebook is still growing its user base at a healthy clip of 15% versus one year ago (which is pretty darn high when you consider that it has 1.7 billion “monthly active users”). It’s also maintaining its high level of user engagement: 66% of its (monthly) users access Facebook every day. Partly due to that high engagement, the amount it earns from advertisers per user is increasing significantly. It’s a no-brainer that the combination of more users and greater revenue per user is very good for revenue growth!
Why should I care?
For the stock: Video will be at the heart of all of Facebook’s services. CEO Mark Zuckerberg said exactly that. Facebook Live is a huge focus – and that’s probably because video tends to grab our attention more than text (and thus is more attractive to advertisers). Over the next few years, the extent to which Facebook is successful with its video initiatives will be a big determinant of its revenue growth.
The bigger picture: Digital advertising is an increasing threat to traditional advertising platforms – especially television. Global advertising spending is hardly increasing and yet Facebook’s advertising revenue grew 63% versus last year. That tells you it’s taking market share from others. A concrete example of a threat is that which Facebook Live poses to traditional TV: if our eyeballs shift to Facebook, advertising dollars will follow (Facebook’s advantage is further bolstered by the personal data it has about us – which allows for more targeted and effective advertising).
Originally posted as part of the Finimize daily email.
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