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Facebook Inc. (NASAQ:FB) Gains Massive Revenues With Thoughtful Ad Delivery

Facebook Inc NASDAQ:FB

Facebook Inc. might be the king of the mobile ads space, but the firm doesn’t make as much money as it could make on ads. Those words summarized the position of John Hegman, whom Wired refers to as Facebook’s Chief Economist. John is saddled with finding ways to unlock more money for Facebook from Ads. An exclusive piece on Wired describes John’s plan for fitting ads with the rest of Facebook.

Facebook Inc NASDAQ:FB

Facebook has succeeded in the mobile ads business by finding ways to match users with businesses in a way that doesn’t look like the firm is forcing ads down the throats of users. John says, “What our systems are able to do is think about what is the most relevant organic piece of content we have and what is the most relevant ad we have, and we can balance those things against each other… Again, the aim is to show people things they most want to see—ad or not.”

Facebook Ads by the numbers

Facebook has more than 1.4B monthly active users and the firm recorded $4.04B in revenues in Q2 2015. The bulk of Facebook income comes from its ads revenue and about 76% or $2.9B of its total ads revenue came in from mobile ads. In FY 2012, the firm made $4.28B in worldwide ads revenue and it is on track to make $14.27B in worldwide ads revenue by the FY 2015 to mark a huge 233.41% increase in three years.

Facebook has recorded massive growth in its ad business in the last five years. Statista records Facebook’s growth in the mobile ad space in the last five year noting that, “in the first quarter of 2010, the company’s advertising revenue totaled 340 million U.S. dollars and payments and other fee revenues totaled 5 million dollars. In the third quarter of 2012, Facebook’s advertising revenue broke the 1 billion dollar mark and in the third quarter 2014 it reached 2.96 billion U.S. dollars”.

Maintaining the lead in a competitive space

Facebook understands that ads are the lifeblood of its business and the firm is making smart moves to maintain its lead in the ads space. For one, Facebook is the only social media firm that has unlocked ads revenue from an active user base, Google makes money from search ads, Apple makes money from hardware, Twitter is more concerned with growing its user base than selling ads.

One of the recent moves that will ensure Facebook’s lead in the ads space is two new ad updates for business clients. Facebook is also reportedly catching up with Google’s YouTube in the video ads race. In the final analysis, Wall Street will continue to love Facebook inasmuch as it maintains its dominant mobile presence.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.