Facebook Dominates Mobile Ads While Quiet on What’s Next

Why Facebook's Mobile Ad Dominance Is Just Beginning
  • Social giant has yet to make money off of WhatsApp, Messenger
  • Features like search and live video could also drive growth

The vast majority of Facebook Inc.’s revenue comes from mobile advertising -- a machine that continues to churn out sales results that beat analysts’ estimates. But it won’t always be that way.

There are other properties and features -- like WhatsApp and Messenger, chat apps which both have 1 billion users -- that aren’t yet generating money. They may be formidable revenue drivers, but the company is taking its time revealing how that will happen.

But here’s what we know, based on the company’s most recent commentary:

Search

More than 2 billion searches are conducted each day on Facebook, the company said Wednesday. The company has been retooling the function so search is not just about finding old acquaintances. The new version of Facebook search is meant to surface users’ commentary about live events, photos of vacations and trending news, sorting through 2.5 trillion posts on the network.

Chief Executive Officer Mark Zuckerberg said the product will have three phases. First, consumers will learn to love using it. Second, they’ll naturally start to interact with businesses on it. Third, Facebook will let businesses pay to reach more people.

“Certainly there’s a reasonable amount of behavior in there which is looking for things that, over time, could be monetizable or commercial intent, and at some point we will probably want to work on that,” Zuckerberg said.

Live Video

Facebook has been pushing the use of live video on its platform -- even going so far as to pay some stars to create their own videos. Facebook Chief Operating Officer Sheryl Sandberg said Live is contributing to Facebook’s “time-spent metrics,” but the company hasn’t quite figured out how to make money off of it yet. The company is testing early ideas.

Meanwhile, Sandberg is looking for the best content. “Right now we’re in the really early stages of working with publishers and content producers to create content for our platform.”

Messenger and WhatsApp

Facebook used the same idea about phases of a business when talking about Messenger and WhatsApp. Both are in the second phase, at the verge of being able to make money from business interactions, executives said. Facebook is doing some early testing on Messenger in particular, but the focus is still on monitoring the communications between businesses and customers, Sandberg said.

WhatsApp is already used often for commercial purposes, like negotiating sales and setting up product delivery, especially outside of the U.S. The company hasn’t talked about specific tests of revenue-generating WhatsApp features yet.

Oculus

Facebook is selling a virtual reality hardware device this year for the first time, and barely mentioned it on the call.

“We filled all of our preorders for Oculus Rift and we’re seeing increasing demand from retail as stores plan for the holidays,” Zuckerberg said. “As of the second quarter, more than 1 million people a month are now using Oculus on mobile phone through our Gear VR partnership with Samsung. More than 300 apps are already available at the Oculus store for Gear VR.”

But Oculus for Zuckerberg is still very much an investment, with 20 percent of the budget being spent on research to make virtual reality better in the future. The company may not profit from the effort for years.

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