Facebook Is In For A Solid Q2 2014

  • Facebook ad partner Nanigans has released its Facebook advertising report.
  • The report points to solid growth in the CPC and CPM prices on the social network, with a higher CTR pointing to better targeting of ads.
  • In view of the report we look forward to a solid topline and earnings growth in Facebook’s upcoming Q2 2014 earnings release.
Facebook all set for a solid Q2 2014

Facebook (FB) is scheduled to report its Q2 2014 results after market hours on the 23rd of July. Facebook has seen rapid revenue growth over the last few quarters with mobile contributing a greater share to its ad revenues in each successive quarter.  Given below the Facebook stock charts display the YoY revenue growth (Figure 1), and Facebook revenue (Figure 2).

Facebook YoY revenue growth trend

Facebook YoY revenue growth
Figure 1

Facebook revenue chart Q1 2014
Figure 2: Facebook revenue chart by Amigobulls

Mobile monetization has been a clear driver of revenues with mobile contributing over 50% of revenues in the last two quarters.

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

PC Ad Revenue (in %)







Mobile Ad Revenue (in %)







Ahead of its upcoming earnings an important question is whether or not Facebook can maintain its scorching growth rate in Q2 2014? An indication to Facebook’s Q2 2014 performance is a report from its advertising partner Nanigans.

Facebook monetization to rise further

Nanigans reported a solid growth of 218% in the global cost per mille (CPM) price on the platform accompanied by a 29% YoY growth in the cost per click (CPC) on the platform. This was in combination to an increase in the click through rate (CTR), which is one of the primary reasons for the increase in ad prices.

Facebook advertising metrics
Source: Nanigans global Facebook advertising report

The metrics of CPC and CPM are important drivers of growth for any online advertiser as these drive the monetization level of an online platform. With each of these metrics seeing a tremendous YoY growth, we expect Facebook to report solid growth in ad revenue per user which is a measure of Facebook’s ability to monetize its platform. At Amigobulls, we think Facebook stock is once again set to report a strong quarter driven by increase in ad prices on the platform.

Facebook ads are now more relevant with better targeting

The increase in the click through rates(CTR) is a proof of the improvement of ad targeting on the social network, as relevant and interesting ads have a higher chance of getting clicked leading to a higher click through rate.

In conclusion, going by the improvements in the three metrics reported by Nanigan, we look forward to solid topline and earnings growth in Facebook’s upcoming earnings release. We re-iterate our cautious outlook on Facebook stock with concerns surrounding the current valuation multiples enjoyed by Facebook stock. View our Facebook stock analysis.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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