Statista recently released a breakdown of Facebook's (NASDAQ:FB) income showing that mobile ad income has become its largest segment. With steadily increasing traffic, the social media platform is putting Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google attempts to shame, leaving shareholders happy with the social media site's ability to acquire and retain more advertisers.
In the following video, Fool analysts Sean O'Reilly and Dylan Lewis break down Facebook's business and examined its future. Listen to the full podcast by clicking here. A transcript follows the video.
Sean O'Reilly: Is this the cool infographic?
Dylan Lewis: This is the cool infographic I saw. The title is "Facebook's Growth is Entirely Fueled by Mobile Ads." It breaks out Facebook's revenue by three major segments: desktop advertising, mobile advertising, and payments. You look at the numbers in a table and you see the growth, but to see it visualized is pretty staggering.
O'Reilly: That's a pretty line up.
Lewis: Desktop has been more or less flat since early 2012 and almost all the growth the company's made on the top line has been via mobile revenue.
O'Reilly: Taking a step back real quick, because we just did a show on Google, and their revenue per ad on mobile is going down, but they're making it up on volume so it's fine. Did Facebook mention any of that at all? Does it matter to them?
Lewis: Yeah. That's a great point. I think it plays into the relevant and effective mandate that Facebook has set for themselves when it comes to guidance. They got into their ad price volume metrics on the conference call and they said "Average price per ad increased 61%, while total impressions declined 10% on a year over year basis." If you're looking at year over year, how they're making their money that's very encouraging.
O'Reilly: It just goes to show, because we mentioned this again before -- Facebook has way more info on me than Google does. Google has a lot of info so that's probably helping their ads.
Lewis: Yeah. I think it's a pretty level playing field in terms of the data collection. All in all I think you have to be very encouraged by what we're seeing on the price per ad side. They pointed to two main drivers for this. One of them being the shift to mobile and how effective those ads have been, and one of the other main ones being page designs impacting inventory. That comes into play. You'll notice on the right column...
O'Reilly: Okay. I was about to say "My Facebook looks kind of the same."
Lewis: I think there used to be more ads populating over there and they've been a little more selective with that. One of the things they talked about was, moving forward we should not really expect the same dramatic year over year swings. They've hit a full year of comps after the redesign.
So we won't be seeing these swings moving forward, but if you were to look at things sequentially I think you're still very encouraged by the results. Cost and volume both look great. Volume increased by 7% and average price is up 5%. Great numbers to see and like we talked about with Google...
O'Reilly: So this compares really well with Alphabet's Google.
Lewis: Yeah. This is something we've talked about on the show before. I'm guessing due to lower engagement and lower ROI on mobile, they've had to cut back their CPCs.
Dylan Lewis has no position in any stocks mentioned. Sean O'Reilly owns shares of Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. 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.