Facebook Inc.’s (FB, Financial) revenue growth in the recent past has been tremendous. Despite crossing $5 billion in quarterly revenues last year, the company's fourth-quarter 2016 revenues grew 53% to touch $8.629 billion. Facebook’s future revenue growth is all but guaranteed due to two main factors: the level of mobile advertising revenues and its growing average revenue per user (ARPU).
Facebook’s user base growth in developed countries has already slowed down to more reasonable levels. Although there is some more ground to cover in the Asia-Pacific and Rest of the World regions, with nearly 2 billion users already in the bag, Facebook’s growth in the near future is going to depend on how fast internet penetration increases in markets outside of developed countries.
But Facebook gets the lion’s share of its revenue from mobile, which is already the lead platform for data consumption around the world. Global desktop sales have been steadily declining over the past five years, and no one really knows if they will recover. The odds of getting back to old levels is nearly impossible because smartphones and tablets have all but removed the need for a personal computer.
While consumers typically still use desktops and laptops in their offices, most do not use personal computers to connect to the internet when at home. The time spent on consuming social media, video content and other entertainment is on mobile devices.
As Facebook became bigger and bigger, mobile advertising revenue contributions increased massively. In 2012, mobile advertising revenues accounted for 11% of the company's overall advertising revenues, which rose to 84% during the fourth quarter of 2016. Facebook effectively reversed mobile versus desktop revenue contributions in a span of four years, the same period in which PC sales were declining and smartphone sales were moving up.
In its 2012 annual report, Facebook estimated mobile advertising revenue was 11% of its total adverstising revenue. In its fourth-quarter 2016 earnings report, the company said mobile advertising revenue accounted for 84% of total advertising revenue.
As consumers around the world transitioned to mobile, Facebook moved along with them. With the bulk of revenues now coming from a platform that is going to be the prefered choice for data consumption in the future, Facebook has already future-proofed its advertising revenue stream.
As advertisers start moving away from traditional advertising mediums to digital ads, they will make their way to mobile. Facebook will be right there with all its mobile statistics to welcome them home.
Disclosure: I have no positions in the stock mentioned above and no intention of initiating a position in the next 72 hours.
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