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5 key takeaways from Facebook's Q1'16 results

03-May-2016
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5 key takeaways from Facebook's Q1'16 results

Facebook’s first quarter results for 2016 beat all expectations by analysts. Taking advantage of the great results, Facebook further announced a new type of stock options that will protect Mark Zuckerberg’s control of the company in the long run.

We take a look at some of the key highlights of Facebook’s Q1’16 financials:

Mobile continues to be the main contributor
Facebook’s Q1’16 filings reiterated the continuing strength of the company’s mobile growth, both in terms of users and revenue. Facebook reported mobile ad revenues of $4.2 billion, a 75 per cent increase YoY. Mobile ad revenues now contribute to 82 per cent of total ad revenues for Facebook.

“On the supply side, we continue to see healthy growth in the number of people using Facebook, time spent across our products, and ad load. On the demand side, we believe the investments we’ve made to improve our mobile advertising solutions are helping drive value for both people and marketers. In Q1, the average price per ad increased by 5 per cent, while total ad impressions increased by 50 per cent,” said David Wehner, CFO of Facebook.

In terms of users, over 1.5 billion people accessed Facebook from mobile devices in March, up by 21 per cent from last year. Mobile Monthly Active Users (MAUs) were 1.51 billion in March, an increase of 21 per cent year-over-year. On the other hand mobile Daily Active Users (DAUs) stood at 989 million on an average for March 2016, an increase of 24 per cent year on year.

Facebook is playing the long game
One of the key takeaways from the Q1’16 filings was the company’s decision to release a new category of stock options. The new “non-voting Class C” stock ensures that control over the direction of the company in the long term remains firmly in Mark Zuckerberg’s hands. Just days after the release of the  new stock, Facebook has already been served a class action lawsuit by disgruntled investors who feel that the new stocks give too much power to Zuckerberg.

But for Zuckerberg, who has long spoken about the importance of having a central say in the vision for the company, this is a brave move and one perfectly timed to coincide with the company’s admirable financials, especially at a time when other tech giants like Alphabet, Microsoft, Twitter, etc. have posted lukewarm results.

Native advertising has increasingly become a priority
83 per cent of the overall inventory on the platform is native and over 50 per cent of Facebook publishers are only using native ads, informed COO Sheryl Sandberg.

“One of the drivers of the consumer shift to mobile is video. People are sharing and creating nearly 3X more video on Facebook than they were a year ago and, as of February, the time people spend watching videos on Instagram increased by more than 40 percent over the preceding 6 months,” she further added.

With Facebook’s push for mobile and video, native ad formats will have a huge role to play.

User base continues to grow, despite earlier concerns
There have been murmurs from some quarters that Facebook’s user base might be shrinking, especially among the younger generation. However, the latest results seem to indicate that any perceived slowing down of growth might have been an aberration. It still remains to be seen what the demographic breakdown will tell us and whether Facebook is still popular among the youth.

As per latest numbers that Facebook released, DAUs were 1.09 billion on an average for March 2016, an increase of 16 per cent YoY, while MAUs were 1.65 billion as of March 31, 2016, an increase of 15 per cent YoY.

Oculus Rift practical applications still some time away

Oculus Rift, the Virtual Reality (VR) company that Facebook acquired, has been the talk of the town over the years but any major developments that we were expecting seem to be premature. Zuckerberg has categorically stated that Facebook does not expect VR to become mainstream straight away.  “Most Rift early adopters are gamers and developers, but eventually we believe that VR is going to be the next big computing platform, and we're making the investments necessary to lead the way there,” he said.

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