Photo Credit: Marco Paköeningrat/Flickr.com
According to eMarketer's report on US advertising, total digital ad spending in the country is expected to grow 16% to $83 billion this year. While Alphabet will remain the leader in the market with 41% of US digital ad revenues, it will continue to lose ground to facebook (Nasdaq: FB) within display advertising. Facebook's US display business is expected to grow to 32% to $16.33 billion and account for 39% of the US display market. Alphabet will be a distant second with 12.5% of display ad share.
Facebook's Financials
Facebook's Q1 revenues grew an impressive 51% over the year to $7.857 billion, ahead of the market's estimates of $7.83 billion. EPS of $1.04 was significantly ahead of the Street's projections of $0.87. Facebook announced that it was no longer reporting adjusted expenses, income, tax rate, and earnings per share. The change in reporting measure did worry the market as the stock fell a bit despite the earnings beat.
By segment, advertising revenues grew 51% to $7.86 billion, ahead of the market's expectations of $7.67 billion. Ad revenue growth is recording a minor slowdown. In the last quarter of fiscal 2016, ad revenues had reported a 53% increase. Revenues from payments and other fees fell 3% to $175 million.
Among operating metrics, Facebook's daily active user count improved 18% to 1.28 billion. It is slowly reaching up to the 2 billion mark as its monthly active user base grew 17% to 1.94 billion. Facebook's recent growth was driven by emerging markets. It had 716 million users in the Asia Pacific region, recording a growth of 27% over the year compared with 5% growth in the US and 6% growth in Europe.
Facebook does not provide an outlook, but the market is expecting its full-year revenue growth to slow to 26% next year from 38% in 2017.
Facebook's Ad Worries
Analysts estimate that Facebook will continue to have a tough time in delivering ad revenue growth. While mobile ad sales may have grown 58% over the year in the quarter, their share of the total revenues has been relatively flat. Mobile advertising accounted for 85% of revenues in the current quarter compared with 84% for the last two quarters and 80% a year ago.
