Facebook released it’s earnings for the 1st quarter of 2013 yesterday (01 May) and although they present a pretty picture because they compare the earnings to Q1 earnings of 2012, the view is far from clear. This is what they present on their investor relations site:





*GAAP: Generally accepted accounting principles

If you look at the earnings presented then you see a whopping $400 million increase in revenue, coming up to almost 38%, which without perspective seems like a big gain. However, the truth is that it is in fact a drop from Q4 2012 earnings as you can see:





This shows a drop of nearly 8% or $127 million. In the big scheme of this I suppose to some, an 8% drop doesn’t matter much as they can always make the money back, but my primary interest lies in how the money was lost. Facebook has been increasing its revenue from mobile app adverts by leaps and bounds and in Q1 of 2013 it generated them $1.25 billion, accounting for 30% of their total revenue. However, they have been falling behind on desktop advertising it seems. If you look at the CTR (click through rate, it refers to how many people actually click on ads, which is how Facebook makes money by charging the clients) you can see that although CTR’s have increased on the mobile only side, they have taken a beating on the desktop site.

One thing that they have realised is that CTR’s seem to go up when the adverts are placed right on your newsfeed rather than to the right where they are now. This would also explain why CTR’s on the mobile only side is so much higher, because on the iOS and Android apps the adverts are shown right on the main feed. Facebook noticed this a while back actually and they have gone to great lengths to capitalise on it. This why when the new New Feed template comes in for all users adverts will now be only placed on the main news feed. If you got excited about the new features such as bigger more high definition images, well guess what? The ads will be big too, and they will be enticing and they will want you to click on them, and you will…probably.

Now that the ad revenue of it is covered, I want to take a closer look at the user revenue side of Facebook, because without us users, they wouldn’t be making the money.

Looking at the data it is evident that Facebook’s recent push to get into the Asian market (read China & India) is working. Asia was the only region that spent more on advertising on Q1 2013 than it did in Q4 2012.

But if you take a closer look at the data for how much revenue each user generated for Facebook throughout the world, its bad news for the social media giant. Asian marketers might be willing to splash the cash on advertising but it seems the users aren’t buying. They experienced decreasing average revenue per user across the board.

So what’s Facebook to do in the face of such bad news? Well they have to keep smiling, keep pushing advertisers and investors to believe that it is still the money making behemoth that it claims to be and pray that once the new New Feed has be rolled out it starts to generate more revenue and fast because one quarter of reduced profits might be ok but 2 in a row and investors will start to squirm and some might jump ship.

Azmain Hossain

At the end of each of our posts we will include what the other person, in this case Rachel, has to say about this topic.

As the figures above show, Facebook have lost a lot of brands’ trust, they may seem like a massive company but in truth they’re only as big as their users and the loyalty they show. One thing that has become apparent is ads need a big shake up to be noticed, I think a big reason for their failure is because pages are free and word of mouth spreads quicker than clicking a link. They need to invest more in their pages interfaces and put themselves in their users shoes. We like the personal touch that pages have, we don’t want to bombarded with adverts. Of course though they still need to make money, but again this is where pages can help. If they featured ads on appropriate pages this would appeal more to users.

Rachel Charlton-Dailey