Why Facebook’s Earnings Matter to Housing Finance

This earnings season Facebook’s performance matters to housing finance entities because changes in the number of Facebook’s active users and mobile advertising revenue has something to do with their own current and future performance.

Greenlight polled 500 people globally “to gauge how much they would be prepared to pay not to see ads when using Facebook,” which matters to all financial institutions in all industries, including housing, as they strive to figure out how to best use the power of social media to advertise services and reach out to potential clients.

“Search & Social Survey 2012-2013” poll findings show 15% of users would be prepared to pay Facebook “to see no ads at all.” Up to 8% indicated they would be willing to spend $5, up to $10, even more per month. (Participants included students, law enforcement professionals, medical staff, accountants, lawyers and the unemployed.)

The London-based independent digital marketing agency that monitors how Facebook and Twitter, along with the financial institutions that use them, monetize their services, said the survey tested a speculative suggestion that Facebook could earn almost three times more than the $4.3 billion in advertising revenue for 2012 by offering users the option of an ads-free experience at a cost of $10 per month.

According to Twitter’s Biz Stone suggestion, Greenlight said, Facebook could earn at least $12 billion per year if a minimum of 10% of Facebook’s 1.1 billion users buy into the option.

Greenlight’s survey also showed nearly 70% of respondents "never" or "rarely" click on advertisements or sponsored listings in Facebook, indicating advertising revenue could become a concern.

Earlier in March when Facebook unveiled the redesign of its news feed, Greenlight’s COO, Andreas Pouros, noted the change mirrored Facebook’s mobile news feed advertising format which proved to be highly successful and, in his view, was a move “to help to boost revenue.”

Facebook’s redesigned news feed has a problem, Pouros warned, because “the conflict between user experience and driving more ad dollars” looms large.

As Facebook reported its 2Q results “eyes were fixed on how revenue earned from advertising, mobile in particular, have fared,” Greenlight said.

The number of Facebook daily active users was 699 million in June 2013, up 27% from the year-ago and 1.15 billion monthly active users up 21% annually.

By the end of June Facebook had 819 million mobile monthly active users, up 51% compared to the same period in 2012 and 469 million daily active users. While substantial, user growth is, however, lower than the 54% annual increase reported in the first quarter when the number of mobile monthly active users was 751 million.

About $656 million in mobile advertising revenue represented 41% of total ad revenue for the second quarter. Advertising revenue, which in the second quarter made up to 88% of total revenue, increased by 61%, compared to the second quarter of 2012, to $1.60 billion.

Facebook’s second-quarter earnings beat estimates. The social network posted earnings per share of 19 cents, higher than the 14 cents per share expected by analysts, on revenue of $1.81 billion. It means the probability Facebook embraces a no-ads option may be low despite the small fluctuations in the rate of number of active users.

Think again, says Pouros who recommends “Facebook may need to pace itself a little less aggressively when it comes to cashing in on its advertising sweet spot”

Contrary to popular belief Facebook already has some competition, he noted. “The challenge faced by Facebook is 'reinventing' advertising so people don't feel they are being bombarded by ads.”

For example, he added, judging from “the very recent addition of a video service to its photo-sharing app Instagram, video ads could perhaps be the next step, and some are in fact already betting on it.”

Better consumer experience can unseat Facebook from the top he argues, the same as then-new upstart Google unseated AltaVista "in the search engine wars" with a cleaner interface and better user experience.