When it comes to dominating online advertising, there are only two platforms really going head-to-head. And one of them is catching up fast.
Facebook is crushing it. The company last night (26 July) revealed second-quarter sales of $9.3bn. This is up a whopping 45pc on last year when it reported revenues of $6.4bn.
The performance yielded Facebook, a company founded in a Harvard dorm in 2004, a profit of $3.8bn, up from $2.2bn a year ago.
The earnings came out the same week as Google, which reported revenues of $26bn and a profit of $3.5bn, which would have been higher if not for a pesky EU antitrust fine of $2.4bn that was levelled against it.
On the face of it, Google, a company that is about six years older than Facebook, is miles ahead in terms of revenues and, at this point, an essential part of the plumbing of the internet as we know it.
But, let’s face it, so is Facebook, which can often be thought of as an internet within the internet.
The thing is, when it comes to dominating the online advertising space, Google and Facebook are really the only two players that matter.
Facebook is making vast forays into SME business advertising and has quickly built up an impressive video advertising business – traditional bulwarks owned by Google.
In many ways, Facebook’s latest results show that the company could make more inroads into Google’s heartlands, and here’s why:
1. Facebook now has more than 2bn regular users
Facebook reported that monthly active users were just over 2bn, up 17pc on this time last year. Around 1.3bn people use its platform daily – that’s a significant chunk of the estimated 7.4bn people on the planet.
2. The social network’s video business is crushing it
Facebook is accelerating its push into video and poses a viable threat to the hegemony once enjoyed by YouTube. Revenues from video are understood to be up significantly and, just like YouTube, Facebook is expected to start attacking the traditional TV business with its own content, including scripted shows. CEO Mark Zuckerberg said that video would be a significant driver of Facebook’s business in the next two to three years.
3. Facebook’s mobile advertising business accounts for the majority of its revenues
Here’s where Google should be particularly concerned – mobile. Facebook last night revealed that mobile advertising revenue represented 87pc of overall advertising earnings, up from 84pc last year.
4. With 1.2bn users, Messenger could emerge as a major advertising platform in its own right
That’s right. Messenger has a captive audience of 1.2bn loyal users and the company is gearing up to move faster to find ways to turn the platform into a cash cow. It has to do this in a tasteful and careful way in order to keep people happy, but 1.2bn users is a tempting target. Facebook is currently testing ads within Messenger but, on an earnings call last night, Zuckerberg emphasised that it is still early days.