Analysts at Susquehanna Financial Group, LLP noted that Facebook Inc (NASDAQ:FB) digital advertising growth was impressive at more than 1,400 basis points compared with the acceleration of other technology companies such as AOL, Inc. (NYSE:AOL) 129 basis points and Google Inc (NASDAQ:GOOG) 118 basis from the first quarter to the second quarter of the current fiscal year.
According to Susquehanna Financial Group analysts Brian Nowak and Michael Constantini, digital advertising growth of Facebook Inc (NASDAQ:FB) was driven by its leadership in mobile and Custom Audiences + News Feed ads with relatively attractive ROI metrics for direct response and long-tail advertisers such as Angie’s List Inc (NASDAQ:ANGI) and credit card companies.
Facebook derived most of its advertising growth from smaller digital ad companies
Nowak and Constantini also noted that Facebook Inc (NASDAQ:FB) derived most of its advertising growth from smaller and weaker digital ad companies. According to them, the social network giant added $242 million of incremental U.S. advertising dollars in the second quarter, the largest year-over-year growth in the history of the company. Its growth rate acceleration was ~1,900 basis points.
“Facebook’s massive reach and low ad unit cost have caused long-tail advertising dollars to move toward the platform,” said Nowak and Constantini. The social network giant has 49 million mobile active users globally in the second quarter of 2013.
Nowak and Constantini emphasized that users are moving toward mobile and advertisers are looking for ways to spend on effective mobile display ad units. The analysts said, “Facebook’s advertisers aren’t specifically asking for mobile impressions, but the company’s massive (and growing) mobile users is giving it to them.”
They also noted that advertisers like the Sponsored Story ad unit of Facebook Inc (NASDAQ:FB) because it is directly transferable from desktop to mobile, which provides the social network giant with a larger share of digital ad budgets as dollars continue to shift from desktop to mobile.
Facebook performance in the second quarter was encouraging and surprising
According to Nowak and Constantini, they are closely monitoring the advertising dollar acceleration of Facebook Inc (NASDAQ:FB) given the fact that its performance in the second quarter was encouraging and surprising. They said, “This is something we are monitoring closely, because while U.S. ad growth compares become ~1,460 bp and ~1,500 bp harder over the next two quarters, respectively, continued rising advertiser demand to spend on the platform for the rest of the year could lead to positive further revisions.”