Shares of Facebook Inc. (NASDAQ: FB) increased 2.82% to $126.82 on Thursday morning after the company posted strong profit and revenue growth on Wednesday. Facebook’s growth appears to know few limits. Even when one source of growth is set to slow down, the social network is ready with another.
Facebook added 220 million monthly active users in the past year, bringing the total audience to 1.71 billion users. Over 90% of Facebook’s users are on mobile devices, where Facebook rakes in the bulk of its ad dollars. Advertising on mobile devices accounted for 84% of Facebook’s $6.2 billion in advertising sales in the second quarter. Revenue generated from mobile ads increased 80% in the second quarter, faster than Facebook’s overall 59% advertising growth rate.
"Our community and business had another good quarter," said Mark Zuckerberg, Facebook founder and CEO. "We're particularly pleased with our progress in video as we move towards a world where video is at the heart of all our services."
The company also acknowledged that it could not just keep cramming more ads onto the site, something known in industry parlance as the “ad load.” Instead of increasing the number of ads in people’s News Feeds, Facebook plans to sell more video advertising, which commands a premium. Other companies, like Twitter Inc. (NYSE: TWTR) and Snapchat, have also said they will pursue this strategy, which has long been a mainstay of YouTube, Google’s powerhouse video site.
According to research firm eMarketer, Facebook’s market share in mobile advertising, where it is the second-biggest player after Google, is expected to up 12% this year from 8.6% two years ago. Twitter and Yahoo! Inc. (NASDAQ: YHOO) both trail, with less than a 2% market share this year.
“There’s a common misconception that the law of large numbers will prevent Facebook from growing further,” said Rahul Shah, chief executive of Ideal Asset Management, who says Facebook accounts for about 40% of his allocation. “But I think what they’re missing is that they’re stealing ad dollars from every other source there is. Pricing will continue to rise and they’ll continue to beat estimates.”