Facebook to invest more in Instagram

Facebook has topped another quarter of revenue that beat estimates after ramping up its mobile-advertising efforts, Bloomberg reported.

The company is powering up ad tools on Instagram, its mobile photo-sharing application, for the first time in the quarter, while boosting the number of video ads on its main application. This has led to a hike in its average revenue: Facebook earning from each user climbed 24% to US$2.97 in the latest period.

Facebook has been working to convince advertisers that it has the most comprehensive marketing products and tools for reaching potential customers on their mobile phones.

Instagram recently announced it has over 400 million monthly users, surpassing the 300 million who use the rival social networking site Twitter. By bringing Instagram into Facebook’s advertising system, the company was able to expand the ad audience by more than 400 million users.

While Facebook has been introducing Instagram ads slowly the company said in September that it would allow more kinds of ads, including longer video spots, on the photo-sharing service.

With those new formats, Instagram could produce more than US$250 million in revenue for the current quarter, Evercore ISI analyst Ken Sena estimates. Businesses will spend about US$600 million on Instagram ads this year — and nearly US$1.5 billion in 2016, according to research firm eMarketer, the AP reported.

“When we talk to advertisers and ad agencies, they’re very interested in Instagram,” said eMarketer analyst Debra Aho Williamson.

The social network giant also reported third-quarter sales of US$4.5 billion, compared with the US$4.37 billion average analyst estimate, according to data compiled by Bloomberg.

Because people sign into Facebook using their real identities, the company is better able to track and target them, boosting its appeal to marketers.

Facebook is expected to account for 17.4% of global mobile-ad spending this year, a market that’s projected to reach US$72.1 billion in 2015, according to eMarketer. That compares with the researcher’s projection for Google Inc. to reach 33.7% in 2014.

The company makes a lot more money from its users in the U.S. and Canada than it does elsewhere. On average, revenue per user was US$10.49 in the U.S. and Canada, compared with US$1.39 in Asia-Pacific.

(Photo courtesy: Shutterstock)