Please ensure Javascript is enabled for purposes of website accessibility

This Trend Bodes Well for Both Facebook, Inc and Google, Inc

By Tim Brugger - Sep 7, 2015 at 6:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The shift to mobile advertising is gaining steam, and the two digital ad kings are poised to benefit.

It's been a couple of years since Facebook (FB 4.24%) CEO Mark Zuckerberg went all-in on both improving the mobile user experience and enhancing the site's advertising alternatives for the hundreds of millions of "friends" that access the site via a smartphone or tablet. Based on last quarter's mobile monthly average user (MAU) data, Zuckerberg seems to have struck a chord.

Mobile hasn't exactly been a friend of Google (GOOG 2.32%) (GOOG 2.32%) -- until recently. Consumers' shift to mobile devices is to blame for what many Google naysayers considered its biggest challenge: overcoming a seemingly ever-declining Cost-Per-Click (CPC) rate. However, as Google demonstrated last quarter, the steps it's taking to address the change in consumer's online usage are making a difference, and if recent data proves correct, becoming mobile-friendly couldn't come at a better time.

Setting the table
There's little doubt that Facebook and Google -- now known as Alphabet -- are the undisputed leaders in digital advertising. Of Facebook's record-breaking $4.04 billion in sales last quarter -- the first time the social media king has broken that revenue plateau -- nearly 95% was from advertising. As it relates to mobile, Facebook's stellar Q2 results are even more impressive.

Of Facebook's $3.83 billion in ad revenue last quarter, about 76% was generated from mobile spots. That figure is up from last year, in which 62% of ad sales were of the mobile variety. One look at Facebook's ever-increasing MAU growth makes it clear why so much of its revenue is being derived from mobile users.

Facebook boasts just shy of 1.5 billion MAUs; equal to about half the connected people on the planet, and nearly all of them have gone mobile. Over 1.3 billion of Facebook's 1.49 billion monthly users access the site via their mobile device.

As for Google and its renewed mobile efforts, CFO Ruth Porat summed it up nicely last quarter, saying, "Our strong Q2 results reflect continued growth across the breadth of our products, most notably core search, where mobile stood out, as well as YouTube and programmatic advertising."

It was just a few months ago that Google announced mobile search had, for the first time ever, surpassed desktop in 10 different countries, including the lucrative U.S. and Japan markets. The news of Google's mobile search wins were accompanied by an introduction to several new, mobile-friendly ad placement and measurement tools.

Like Facebook, Google recognizes that when it comes to ads, "relevancy now triumphs over brand loyalty." Meaning, mobile or not, getting the right ad in front of the right person at the right time is the recipe for success. And Google certainly knows how to collect, collate, and utilize reams of user data for its marketing partners.

How big is big?
For the first time ever, according to eMarketer, 2015 will see more digital ad spending on mobile than desktop. An expected, 51.9% of marketing ad dollars will be spent on mobile spots this year thanks to consumer's growing appetite for "non-voice" mobile usage. For example, in the U.S., eMarketer suggests that adults spend nearly three hours a day on their mobile devices for reasons other than talking. Of that daily mobile time, over half are using smartphones for reasons other than chatting.

With an estimated $30.45 billion expected to be allotted to digital mobile advertising this year, clearly there's a lot of incentive for folks like Facebook and Google to get their ducks in a row -- and the news gets even better going forward. In just four years, mobile ad spend is expected to more than double to over $65 billion. In fact, in just a couple of years, digital spots in general -- both mobile and desktop -- will surpass TV ad spend, and a growing majority of the online marketing will be directed to mobile users.

It's already a good time to be a mobile digital advertiser, and the future looks even brighter. Sure, both Facebook's and Google's stock prices have taken a hit of late -- just as so many others have -- but that's near term. Thanks in large part to their respective efforts to appease users on the go, it's no wonder both Facebook and Google have consensus price targets well above their current share prices.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$191.63 (4.24%) $7.80
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,165.92 (2.32%) $49.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.