Ads and Apps: Where Facebook Is Going From Here

Facebook's first-quarter earnings call gave us some insight about the company's latest acquisitions, current performance, and the future of ad and app expansion for worldwide connectivity.

Apr 30, 2014 at 3:00AM


Source: Wikimedia Commons

Investors and analysts alike have been contemplating the real story behind Facebook's (NASDAQ:FB) latest exorbitant acquisitions and how the company plans to make them profitable for the long term. Last week, Facebook held its first-quarter earnings conference call, and the company's leadership not only helped provide clarity about the vision behind the acquisitions, but also outlined how it plans to remain relevant for users and advertisers.

Value investments
CEO Mark Zuckerberg emphasized that when Facebook pays such high prices for developing companies, it isn't focused as much on the price tag as it is on creating long-term value. Keeping in mind the long-term vision to connect the world, Zuckerberg has been acquiring and developing apps and technology that will help to further that mission. The company's current priority for Instagram, WhatsApp, and Oculus is growth; investors should not expect immediate results. As the subsidiaries grow their user numbers and effective influence on the way we communicate, the apps will then be monetized strategically through targeted and appropriate ads in order to bring in more revenue.

Facebook has 1.28 billion users and Instagram user numbers have increased 809%, from 22 million users to 200 million, since being acquired. Zuckerberg also pointed out that WhatsApp just reported its users at more than 500 million. Facebook hopes to successfully create a communications ecosystem based on sharing-specific information with targeted audiences on a mass scale over the long term. 

Targeted apps
On the horizon for Facebook is a shift to different apps that cater to the needs of specific conversations via information-sharing platforms. Zuckerberg highlighted that users, marketers, and small business owners have different uses for Facebook and corresponding content. While Facebook will still serve as a general place for communicating and sharing information, Instagram continues to serve as a platform for photos and video only, while Messenger and WhatsApp will cater to private conversations and private information sharing. For users who want to share more general information, like news and infographics, the Creative Labs division will create apps like Facebook's Paper. 

Having a group of usable apps that serve their intended and targeted purposes will make Facebook an important competitor to tech and app giants Apple and Google over time. While Apple and Google have a stronger foundation in the app market, Zuckerberg pointed out that Facebook plans to present a competitive edge over them via the number of app installations -- including apps where Facebook can be used to sign-up or sign-in -- and the importance of revenue growth. 

Ads and revenue
Facebook's first-quarter revenue came in at $2.5 billion, up 72% over the first quarter of 2013. Revenue from advertising was $2.27 billion, an 82% increase from the same quarter last year. Mobile advertising revenue represented approximately 59% of advertising revenue, up from approximately 30% of advertising revenue in the first quarter of 2013. 

COO Sheryl Sandberg noted the contrast between user engagement with ads in the classic right column and those in the main newsfeed. As newsfeed ads have produced a higher amount of user engagement, ad prices have increased. Although some would be reluctant to embrace price increases, when thinking about businesses and marketers, it's the value of what is being returned that is more important. Facebook's targeted marketing system has been successful with businesses and brands in converting online users to paying customers. 

Sandberg also noted that Facebook is working to expand the placement of auto-play video ads in its newsfeed to further increase user engagement. With core focus points of targeting, enhancing marketing tools, and more detailed performance measurement tools, Facebook plans to become the world's first platform for personalized marketing, giving the company an edge over competitors and the potential to further increase ad revenue.  

Was it worth it?
Facebook isn't expecting any big returns or explosive expansions in the near term. The current focus is development and growth of technology and apps that will bring the bigger vision and mission to fruition while maintaining steady growth over time.  

GAAP diluted EPS was $0.25 in the first quarter of 2014, up 178% compared to $0.09 in the first quarter of 2013. Non-GAAP diluted EPS for Q1 2014 was $0.34, up 183% compared to $0.12 in Q1 2013. Shareholders will more than likely continue to see continued growth in earnings, year over year, despite speculation and risky investments. A long-term buy and hold for Facebook shares would be an investing option to consider. 

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Felicia Gooden has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers