Facebook Inc (NASDAQ:FB) is scheduled to release its third quarter earnings report on Nov. 2, and analysts are releasing the results of their checks. In general, the themes are all good as the social network is grabbing a larger and larger slice of the digital advertising pie. Facebook Audience Network in particular saw massive growth during the quarter, and the company continues to add new advertisers.
Spending on Facebook skyrockets
Nanigans, which offers advertising automation software, released its latest quarterly benchmark report on Thursday morning. The firm reports that return on investment among direct response advertisers continued to climb during the third quarter, rising 26% year over year on average among the 20 highest-spending e-commerce and game advertisers that use its software. The steady increase in return on investment emboldened these advertisers to spend even more money, as their quarterly budgets for Facebook Inc (NASDAQ:FB) spend skyrocketed 249% year over year on average during the third quarter.
The firm reports that video ads now make up more than half of game advertiser mobile ad spend, In fact, the piece of the mobile ad spend pie taken up by video (among game advertisers) rose 20% quarter over quarter and 101% year over year.
Video ads are particularly lucrative for Facebook Inc (NASDAQ:FB) because top-line cost per impression for them is usually higher for them than it is for display mobile ads.
Facebook Audience Network grows rapidly
The social network announced that it was expanding its Facebook Audience Network in the second quarter to include non-users and more video ad inventory than before. Nanigans reports that the company also greatly increased the impact the network has for performance marketers as well. Before the changes, 56% of the firm’s customers were using FAN and seeing click-through rates that were usually higher than native ads on Facebook Inc (NASDAQ:FB) by “tens or hundreds of percent [sic].”
The firm adds that in the third quarter, 59% of its advertiser base activated FAN and saw “significant” performance results. Among the advertisers that spent on the network through the second and third quarters, the share of spend going to the off-Facebook Inc (NASDAQ:FB) ad network increased 4% sequentially. Nanigans reports that the FAN placements did better in the third quarter than they did in the second quarter as click-through rates improved 37% quarter over quarter, pushing the overall click-through rate of the group to a 34% improvement.
Here’s how FAN stacks up to native ads and their combined click-through rate:
The firm adds that the overall click-through rate on Facebook Inc (NASDAQ:FB) reached a new high of 1.66% after rising 41% in the third quarter, marking the biggest quarterly increase in two years.
What to expect in Facebook’s earnings report
Data points from other sources on Facebook Inc (NASDAQ:FB) also point to strong growth during the third quarter. Goldman Sachs analyst Heather Bellini expects the social network to pose $7.05 billion in revenue, marking a 59% year over year increase and 10% sequential increase. They’re looking for non-GAAP earnings of $1.02 per share. Both numbers are ahead of consensus at $6.9 billion and 96 cents per share.
Their checks back up what Nanigans reported in terms of continued growth in ad spend on the platform, particularly among e-commerce advertisers. Nanigans emphasized that e-commerce advertisers were focusing on Dynamic ads during the third quarter, spending 16% more on them. The firm expects growth of this form of ad to continue during the holiday shopping quarter.
Bellini sees the potential for upside even to her high estimates as one check pointed to a more than $600 million increase in ad spend and a more than 60% year over year increase in same advertiser spend. Her checks pointed to cost per impression falling somewhere between a 3% sequential decline and a 5% sequential increase. Nanigans pegged the sequential decline at 9% globally.
Shares of Facebook Inc (NASDAQ:FB) stock were little moved during regular trading hours on Thursday, trading at around $130.
