
Facebook Climbs to 1.59B Users, Beats Q4 Estimates with $5.8B Revenue - duartetb
http://techcrunch.com/2016/01/27/facebook-earnings-q4-2015/#.kqfyhh:2YGM
======
physcab
Here's the thing that most people don't know unless they are in the
"industry":

* The gaming industry is most likely driving a lot of this growth. I'm sure Machine Zone and Supercell are doing between $5M - $10M a day on FB alone.

* FB is re-defining attribution. They want to bring in big brands and are re-defining last-click to "Multi-touch". Their end game ofcourse is to say the reason why you decided to make a trip to Macys is because you first saw Macys content on FB.

* FB _requires_ developers to send them analytics when they want attribution for Ads. This means that not only does FB have info about the install, but they have all the data about the usage, in addition to all their demographic data.

* FB _still_ is the only reliable source for advanced targeting of ads. This has massive impact on ROI for performance marketers.

* FB by far has the best tools for advertisers with so many bells and whistles that resellers like Nanigans can make a healthy margin just by managing the optimization.

* FB allows any performance marketer to form a closed loop feedback system. Are CPI's on FB high? Yes. But if you know the LTV of your user (now possible with proliferation of analytics tools) you can afford to bid very high at volume (eg Uber) and still get a great ROI.

~~~
spikels
Pretty sure gaming is NOT where Facebook's revenue growth is coming from.
Almost all the growth has been coming from mobile advertising for a couple
years now.

~~~
physcab
Here's an exercise. Go to the App Store, click on Top Grossing. Out of the 150
apps displayed, how many are gaming-related? I counted 113. Thats 75%. I don't
have the charts but you can compare this to a year ago period. My guess is
that percentage has grown. This is not an accident.

~~~
wwwong
FB gaming is dead. It's not the reason why their revenue is growing.

~~~
nickonline
He's not talking about FB gaming. He's talking about mobile games.

Mobile games that are not played on Facebook are paying Facebook for ad space
so that they can reel in additional whales. Games like Clash of Clans & Gears
of War.

------
jrcii
Hopefully for their investors' sake that revenue isn't significantly driven by
click fraud, a rumor that's been circulating for years
[http://thesocialmediamonthly.com/startup-ceo-alleges-
massive...](http://thesocialmediamonthly.com/startup-ceo-alleges-massive-
click-fraud-on-facebook/)

* Is anyone aware of evidence of the extent of click fraud on Facebook? I see a lot of discussion about it but not a lot of data.

~~~
throwaway198374
Sorry for the throwaway, I work in ad tech. Other posters are saying they see
hardly any fraud on Facebook. My employer is a more traditional ad tech
company (think exchange and direct buys) and we estimate 60-70% of our
exchange inventory is fraudulent, and at least 15% of our impressions are
delivered against fraudulent sites (of course we don't tell the customers). In
reality the numbers are probably higher. The problem is that literally
everyone except the end customer is making money off this. As soon as anyone
talks about the need to do something about it the whole "let's not rock the
boat", "what about our revenue targets", "well you can't tell Sales that"
crowd comes out.

I personally think there's a reckoning coming soon to traditional ad tech.
There is so much fraud, such ludicrous and impossible revenue and impression
targets, so much pushback against shitty and annoying advertising, and so
little incentive to be honest with the customer. It can't last like this.

~~~
ghshephard
I would think that customers are reasonably sophisticated when it comes to
stuff like this, particularly when they are spending real $$$. How difficult
is it, for something like brand advertising, to do before/after poll's to
discern how effective the dollar spend is in promoting a brand (with
conversion to sales, it's even more trivial.)

Done properly, the customer doesn't actually care if 99% of the exchange
inventory and impressions are fraudulent, as long as they accomplish whatever
objectives they set out to.

Put more explicitly, if the objective for an advertiser (or, more likely,
their agency) is to build awareness of a brand, they can measure a measure
awareness among their target group, run a few million dollars of advertising,
and then measure awareness again to see the difference. Done with enough
customers, and enough programs, you start to get a very clear sense of where
the dollar is best spent.

~~~
ethanbond
Your hand wavy usage of "measure awareness" is the problem. How do you do such
a thing?

When you're advertising on multiple channels, even if you did have a solid
measurement of awareness (you don't), you still wouldn't know what was
responsible.

This is the appeal behind things like Facebook ads. It seems you have a very
clear sense of what return you're getting because there's such precise
targeting and tracking. The issue is that neither of those have anything to do
with the first portion of your comment: measuring awareness. You still need to
measure awareness objectively and no one knows how to do it.

The people best equipped and most ready to act like they do, however, is — you
guessed it — Facebook and similar ad networks!

Besides, the ad industry has been kept afloat with exactly the type of
behavior that grandparent describes for decades if not centuries. What makes
you think they're more sophisticated now?

~~~
ghshephard
Two ways to measure brand awareness - polling, and are people buying your
product.

And you run many, many programs on lots of channels in different demographics,
and geographies - and see which program is most effective.

~~~
throwaway198374
The polling is often done by randomly inserting Vizu polls into the page
somewhere and hoping someone fills them out. Of course hardly anyone does -
who can be bothered? Still, they've managed to establish themselves as a
credible third-party verifier (not saying they actually are credible - I know
sometimes people running the campaign will fill these out to show that the
campaign is working)

Also, I'm not saying it's all fraudulent and doesn't work at all - of course
if that were the case everyone would know. What I'm saying is that the brand
is massively overpaying, because a large percentage of their delivery goes to
fraudulent bot traffic. And it's pretty much in everyone's financial interest
except the brand's to turn a blind eye.

Also, it's important to know how campaigns are actually delivered: firstly,
Sales sells something wildly optimistic like delivering 1m impressions a day
to 45-50 y/o women in Florida. As time goes on and delivery can't be met we
loosen the targeting parameters in order to "deliver in full" even though this
delivery is no longer to the customers specifications. We might tell them
we're doing that, or we might not and hope we get away with it. Then after the
campaign we take whatever numbers we got and create a story out of it that
makes us look good. If we're working with an agency we give it to them and
they presumably spin it some more before presenting it to the customer.

~~~
brandnewlow
Don't forget that a lot of this is often driven by the brand managers who want
to grow their budgets. If it turns out that they can't spend $1m on "45-50 y/o
women in Florida" in a quarter, then their budget will get trimmed
appropriately, reducing their stature and sway in the organization. The fraud
problem in digital advertising is a hard cycle to break when there's people on
the brand-side helping encourage it.

~~~
throwaway198374
Yes, this is 100% accurate. No-one wants their budget to shrink. Agencies will
come to us at the end of the year with unspent client budget that they really
don't want to give back, lest they be given less to spend the next year.

------
sinatra
I wonder how much of that revenue came from VC-backed startups that just want
to acquire a user-base whatever the cost. Mobile app install costs $4+ for
iPad and $2.5+ for iPhone. Even at a 100% install to launch rate and a 5%
conversion rate, companies need to make $80 per paying users for the numbers
to work. This just doesn't seem sustainable to me.

~~~
physcab
If you run a gaming company, you're most likely tracking everything you
possibly can about who is spending in your game.

If you are running a facebook campaign, you will buy either on volume (don't
care what the price is, just give me the user, ie Uber), ROI (make sure the
LTV of the user is less than the CPI), or profit (make sure we're still making
money even after apple's cut)

Facebook allows you to form a closed loop feedback system. If Uber knows the
LTV of a customer is $100 and CPI's on FB are $10, go to the bank and get as
many of those customers you can.

------
miles_matthias
At my company we're realizing how great of an advertising channel Facebook is,
in the fact that we can immediately narrow down our target audience to people
who have liked a certain page.

It's just very weird to me that a social network that everyone my age and
younger never use. I never, ever post to Facebook and rarely look at it
because it's just my family on it. I connect with friends over snapchat and
meet new people on Twitter.

Meeting new people is nearly impossible on Facebook. Maybe that's why it's
such a great advertising platform with such great revenue? Everyone is on it
(your whole family joined) and the only way for a company to get your
attention is to pay.

~~~
onion2k
There a psychological bias called the "false consensus effect" whereby people
overestimate how similar other people are to themselves. It's backed up by
things like confirmation bias where you tend to socialise with people similar
to yourself so it feels like most people really are like you.

The simple reality is that you just don't know enough people to draw any
statistically relevant conclusions about society. It may well be the case that
none of the young people that you know are on Facebook, but that really only
says something about who you know, not about young people's attitude towards
Facebook in general.

~~~
JBReefer
To your point, I'm also younger and have very few friends on Twitter. If
anything, twitter is old and full of noise. My friends all use fb, Snapchat
and IG

------
ChuckMcM
It will be interesting to see how much of that revenue came at Google's
expense.

~~~
julianpye
Google is all about searching for results and Facebook is all about demography
and thus brands.

So Facebook is taking a lot of advertising budget to establish brands that
used to be for print and television.

Simple example: Diapers. By the time you have a baby, Facebook knows that you
as a couple are expecting and you will see ads establishing relevant brands.
You would never see those ads on Google, because at that time you're not
searching for them. This used to be the business of television advertising. So
you know the brand Pampers long before you ever think of buying a pack of
them.

~~~
shostack
Can you elaborate on why you think Google wouldn't know before FB?

Many (most?) people don't go posting anything about pregnancy before for ~3
months traditionally, and odds are you are going to be searching for symptoms
when you first notice something is wrong health-wise.

When a doctor or test confirms you are pregnant, I'd be willing to bet that
users are immediately pulling up their favorite search engine to figure out
next steps vs. blabbing about it to their BFFs on FB.

Now, if you are basing it purely off of carpet bombing people targeting off of
demographics, yes, FB probably has more solid data there as it is self-
reported and not inferred. But you sure as heck won't get self-reported
pregnancy info earlier than Google will know you are interested in it.

If anything, I'd argue Amazon would have that data in a similar timeframe if
people start looking up pregnancy books.

This also entirely discounts the notion that there is 3rd party data sets at
play which both Google and FB leverage to enrich their data.

All of this is not to say your point on the brand advertising is incorrect--I
actually agree with that as the "feed" has become the new television. But
definitely do not agree on the specific example cited.

~~~
waterlesscloud
The odds are very good that people start discussing things like pregnancy in
Messenger at the same time they start googling symptoms. Public posts aren't
all FB has available.

~~~
shostack
That's actually a great point that I forgot about. It is scary to think about
how they are mining personal conversations like that, particularly about
something so sensitive.

Could easily lead to a situation like when Target outed a girl as pregnant to
her father [1].

[1] [http://www.forbes.com/sites/kashmirhill/2012/02/16/how-
targe...](http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-
figured-out-a-teen-girl-was-pregnant-before-her-father-did/)

------
danbruc
I graphed Google search trends for different platforms [1] a few weeks ago. If
Facebook is like the others, it crossed its peak three years ago and is dying
ever since, something that matches my personal experience on Facebook. So
where does this disparity come from, how can Facebook keep announcing new
records while the search trend points downwards for about three years? Did
they manage to break free from the correlation? Maybe because of the
widespread use of its apps? Does the rise of WhatsApp play a role in the
presented numbers?

Don't get mislead by the normalization, Facebook has still more than six times
the search volume compared to the peak of Myspace.

[1] [http://i.imgur.com/SGci58n.png](http://i.imgur.com/SGci58n.png)

~~~
aembleton
* If someone has the Facebook app then they're not going to be heading there via Google.

* Instant articles means they get a cut of advertising revenue from external sites such as Daily Mail and New York Times when users click on a shared story

* It is plausible that they have improved their ad targeting algorithms so that those who want to see an ad are more likely to see it.

~~~
danbruc
_If someone has the Facebook app then they 're not going to be heading there
via Google._

On the other hand a lot of other searches contribute to the search volume and
should track the popularity of Facebook, problems with the app, developers
looking for API documentation, discussions of policy changes, people looking
for jobs, news about the company and so on. So even if people are using the
app the search volume should say something about the popularity. One thing I
can imagine though is that a shift from the web to the app might decrease the
search volume by such a large amount that it totally obscures the trend of the
other kinds of searches I mentioned above.

~~~
aembleton
I expect most searches are from people typing Facebook into Chrome and hitting
Enter.

If those people are shifting more and more to the mobile app then they won't
be doing that so much. Sure, they'll search if there are problems with the
app, or they're after a job but that has got to be less than those trying to
access the site.

~~~
danbruc
That is exactly what I meant with my last sentence. According to the graph
from this article [1] the number of web users halved between Q1/12 and Q4/14
while the number of web and mixed users combined increased by about seven
percent. It's hard to match against the search volume, it may or may not
explain it.

As already mentioned, from my personal experience I would say I see evidence
for the decline, I see no new users but I have seen a few users leave. Maybe
there is also regional variations, older markets already losing users while
newer markets are still growing.

[1] [http://pandawhale.com/post/57536/jan-2015-facebook-
has-119-b...](http://pandawhale.com/post/57536/jan-2015-facebook-
has-119-billion-monthly-mobile-active-users-and-70-of-ad-revenue-is-from-
mobile-ads)

------
flexie
So Facebook makes less than $3.7 per user per quarter or some $15 per user per
year.

Don't anyone find it amazing how little money they make per user (and still
have a good business)?

The article doesn't say how much time the users spend on FB, but they say that
users spend 100 million hours monthly on watching videos. If we assume that's
50% of the time spent on FB, users spend 200 million *365 = 73 billion hours
yearly on FB or in average a little less than 50 hours per user. For $15.

So roughly speaking, Facebook makes $1 for every 3 hours a user spends.

~~~
hmate9
$1 every 3 hours is pretty good no?

------
aj_nikhil
Still very less given the amount and talent of people working there. I see a
downhill graph over the years. Next Yahoo in making.

------
cft
Except that most of Americans between 16-22 (the oldest FB audience) have
quit. The lagging indicators are the user acquisition in emergent markets and
the revenue. In the case of Blackberry for example, the revenue peaked at
least two years after the actual product was dead.

~~~
morgante
> Except that most of Americans between 16-22 (the oldest FB audience) have
> quit.

That's an extraordinary claim and requires extraordinary evidence. You don't
have any.

As someone who's actually _in_ that demographic I can tell you it's patently
false. Facebook continues to be the hub of social networking, particularly on
college campuses. If you're having an event of any sort, Facebook is the place
you announce it. Messenger is becoming the dominant messaging platform for
most people I know.

If you're going to make extraordinarily bold claims, it'd be good to offer
some actual evidence. Or at least put your money where your mouth is by taking
a large short position.

~~~
kuschku
As someone in that demographic, I see new posts on my timeline every 2 or 3
weeks.

If I want to know what's going on on the campus, I check Jodel.

If I want to message others, I use WhatsApp.

Facebook's acquisition of WhatsApp is the only reason why I use any of the
products.

~~~
morgante
From your profile, it looks like you're German, not American. Germans have
always had a tepid relationship with Facebook and it's definitely not a core
or strategic market for them.

(If I'm wrong, I apologize for assuming.)

------
forgotusername2
I was wondering what all those bots and fake clicks where about! now we now!

------
halayli
FB stocks up 12%

[https://www.google.com/finance?cid=296878244325128](https://www.google.com/finance?cid=296878244325128)

------
coldcode
Apple makes more profit than all of Facebook's revenue times 3. Yet Apple
stock goes down and Facebook, which has a price/revenue ratio that makes no
sense whatsoever, goes up. Apple makes products people generally love, and
Facebook makes money from ad and ad like things which people hate (and
eventually will block). I really don't understand the stock market at all.

~~~
aembleton
Stock isn't bought just based upon last quarters profits, but on how much
investors think can be derived in the long term.

Facebook have done better than investors expected. Apple have done worse than
investors expected. What makes you think people hate Facebook ads? Facebook
ads are the only ones that I have ever clicked on, and then made a purchase. I
think they are well targeted and very effective.

------
frik
How many of the 1.59B users are still active, at least once a week? Not just
have the app installed and receive just notifications but actually open the
app or website?

Facebook is mainly used by 30+ woman's nowadays, to share their baby, cat and
dog photos. And is a huge ghost town with much of the profiles haven't been
updated or have posts for multiple years. It's like MySpace in 2010.

Facebook (and to some extend Google with its bullish Google+ auto-written
posts based on Youtube comments, etc that no one wanted) single handed
destroyed/burned the notion of social networks because of pure greed. Yet
social network as in 2008/09 (at its peek) were great, than came the broken
"newsfeed" that doesn't show all friend updates in chronologic order anymore,
but selected featured filtered crap.

[I am talking about Facebook the app or website - the social network. Not the
messenger app nor WhatsApp nor Instagram]

~~~
TheLogothete
If you bothered to read the article, you would know the answer to your
question. All of those 1.59B users login to facebook at least once a month,
which are reported separetly from the Messenger users, who are 800M.

Imagine how the rest of your musings sound.

------
shostack
The big question mark for me is whether FB will be the advertising giant to
finally crack the attribution nut.

You see, the age old problem of "I know I'm wasting half my budget, I just
don't know which half" is still alive and well. These days, we have SO MUCH
data about cross-channel attribution that it can be hard to plot a path
forward (and that's if you are even aware of this concept and its
implications).

For those who are savvy, display and video CPMs might seem a bit inflated
right now. There is a major opportunity to leverage analytics to prove to
advertisers the incremental lift of their display and branding efforts.
Dedicated attribution services like VisualIQ, Adometry, and Convertro have
been getting snapped up by big advertisers, but so far nothing has really
reached the SMB and mid-market level for solution pricing.

I'd LOVE to spend more of my budget on FB and display, but when they mix view-
throughs in with click conversions by default, that raises red flags. What is
the value of a view-through? It is sure as heck not 100% attribution credit,
which is what the default would place it at.

Attribution is a super deep and very complex subject (and one I'm very
passionate about). Getting better visibility is my top priority for 2016 as it
is many other advertisers. Structuring proper tests is unfortunately not just
a software issue, particularly with smaller businesses with less data as you
need to control for many factors.

That said, Google has fired the first shots in this fight with their awesome
basic attribution tools in GA that they give away FOR FREE. I'm dying to see
what they do with their Adometry acquisition and whether they will make that
available to the masses.

FB has a huge opportunity here and I know they've been making inroads in this
area with Atlas, but I'd personally love to see them release "Facebook
Analytics" as a direct competitor to Google Analytics, and make a real effort
to prove the value of their inventory from an incremental lift/attribution
standpoint.

I'd LOVE to spend more on branding if I could be more certain of the actual
impact it is making to allow me to justify the budget I'm putting towards it
compared against more directly measurable options lower in the funnel (like
some aspects of paid search, which has its own attribution issues). The tools
just aren't there though.

If FB can provide advertisers with the tools to more definitively say "this is
making you money" and not just "oh, we summed up all these random stats and
call it Engagement--look at the shiny engagement metric!" I'm confident they
would find advertisers even more willing to open their wallets, shift spend
away from the GDN and exchanges, and stop questioning or caring about click
fraud since it would be a self-correcting issue (ie. high levels of click
fraud would in theory result in lower perceived incremental lift if proper
analysis was conducted).

If you are at FB and touch Insights or anything related to attribution on
Atlas, please dear god contact me--I live right near HQ and would LOVE to have
a deep conversation on how to improve this for advertisers.

~~~
mbesto
Are you familiar with conversion tracking? You can attribute conversion
(checkout, sign-ups, etc) with clicking or viewing of FB ads. More details
here:
[https://www.facebook.com/business/help/460491677335370](https://www.facebook.com/business/help/460491677335370)

~~~
shostack
I appreciate you sharing your information as it came across as an honest
attempt to be helpful, however I think you might find it helpful to read this
post by Avinash Kaushik [1] and then reread my post. I do digital advertising
for a living, and that post is what I recommend to all who are new to the
concept of cross-channel attribution as it is a very complex topic from both a
data, math, and business standpoint. Easily one of the biggest opportunities
and problems in the ad industry at the moment (and has been for some time).

[1] [http://www.kaushik.net/avinash/multi-channel-attribution-
mod...](http://www.kaushik.net/avinash/multi-channel-attribution-modeling-
good-bad-ugly-models/)

~~~
mbesto
No worries. I am actually in conversations with a client right now about
multi-channel attribution, as I know it's a problem. The reason I responded
the way I did was about your comment here:

> _If FB can provide advertisers with the tools to more definitively say "this
> is making you money" and not just "oh, we summed up all these random stats
> and call it Engagement--look at the shiny engagement metric!" I'm confident
> they would find advertisers even more willing to open their wallets, shift
> spend away from the GDN and exchanges, and stop questioning or caring about
> click fraud since it would be a self-correcting issue (ie. high levels of
> click fraud would in theory result in lower perceived incremental lift if
> proper analysis was conducted)._

Engagement metrics to me are much more about brand awareness then it is
converting sales, so I didn't understand why you would point to engagement
metrics when questioning tools that drive sales. Are you saying that you use
conversion based ads on FB and aren't confident that their attribution window
provides a highly accurate view of their performance?

~~~
shostack
NP, I can see why that might have been read in a different way.

I may have mixed my points up a bit, but basically I've noticed that they seem
to lump quite a few things under "engagement" (an autoplayed video that plays
for 3 seconds from someone scrolling in their feed is apparently a valid
view). I'm using engagement in the broader sense, not the specific definition
in the FB platform here, although it is pretty all encompassing there as well
in terms of Likes/Comments/Shares (none of which are really the apples to
apples at all).

My bigger beef is on the view-through side. Attribution windows alone don't
dictate attribution weighting. You really need to be measuring incremental
lift, otherwise you end up with lots of people seeing an ad and a ton of view-
throughs, but a lot of wasted spend since many would have converted without
the impression.

------
sly_foxx
Facebook is the biggest scam for most businesses.

1) They've pulled bait and switch when they decided to charge to reach users
that have already liked your page. Most of those users liked your page because
you've posted a link to FB on your site.

2) Click fraud is rampant [1]

3) They make money on copyrighted videos + ripping off YouTube content
creators [2]

[1]
[https://www.youtube.com/watch?v=oVfHeWTKjag](https://www.youtube.com/watch?v=oVfHeWTKjag)

[2]
[https://www.youtube.com/watch?v=t7tA3NNKF0Q](https://www.youtube.com/watch?v=t7tA3NNKF0Q)

~~~
arasmussen
Big spenders do a lot of due diligence to make sure that the money they spend
is actually giving them a positive return. It's not like businesses just throw
millions down the drain and hope it gives them results. Facebook is working
great for them and it is not a scam otherwise businesses wouldn't be spending
billions on advertising there every quarter.

~~~
ethanbond
Or, as pointed out in a comment above, everybody is lying to everybody and the
only loser is the customer. The customer may still find advertising to be a
net win, but they have no clue to what degree it is such.

