Here’s why Facebook got away with a 335 percent hike in ad prices

Ads dominated the discussion during Facebook’s fourth quarter earnings call this Wednesday. COO Sheryl Sandberg told analysts that the company is charging 335 percent more for each ad on average, despite the fact that the ad impressions has decreased by 65 percent.

The company says its ads have become more efficient at targeting and tracking people. Facebook is measuring the return on investment that each advertiser receives for every dollar spent. “When I sit down with clients this year compared to last year … we’re able to A/B test Facebook ads versus no Facebook ads and what the effect is on their sales,” Sandberg said on the call.

She repeated Facebook’s new advertising mantra, a tactic it’s calling “people based marketing.” The company is building new ways to measure a user across multiple devices, like phone, desktop, laptop, and tablets, instead of relying on cookies, which don’t work well on mobile.

“The ability to understand that that’s one person, to serve an ad and measure through all the way, we think is going to massively improve the efficiency of the system,” Sandberg said.

She’s not the only one who thinks that. On Google’s earnings call last quarter the company admitted it was keeping an eye on Facebook’s innovations in the mobile advertising space. At the time, analysts were concerned that Google didn’t have enough visibility in the app ecosystem, via Gmail logins, to track users across their apps and target the best ads to them.

Since many apps have integrated Facebook login technology, the company is the leader in targeted advertising for mobile. 69 percent of Facebook’s advertising revenue came from mobile in Q4, 16 percent more than in the same quarter of 2013. It’s staggering growth, given it was only two years ago it was struggling to figure out how to make money on mobile.

As for the rest of Facebook’s Q4 numbers, the company beat Wall Street estimates for the tenth quarter in a row. Its growth continues unabated and it surpassed its number of monthly active users from Q3 by 40 million.

Here are the Q4 numbers:


Analysts expected — $3.77 billion

Facebook actual — $3.81 billion

Earnings per share (non gaap):

Analysts expected — $0.48

Facebook actual — $0.54

Monthly active users:

3rd quarter 2014: 1.35 billion

This quarter: 1.39 billion

Other significant stats:

3 billion video views per day

890 million daily active users in December

1.19 billion monthly active mobile users

The company’s continued success comes on the heels of positive news about its social acquisitions and messaging efforts. As Kevin Fitchard reported this morning, Facebook owns the top four most downloaded apps worldwide in 2014: WhatsApp, Instagram, Facebook itself, and Facebook Messenger.

Facebook’s attempts at building new social apps haven’t succeeded quite as well — Poke was quietly shuttered, and Slingshot and Rooms have been laying low. But Zuckerberg’s lavish acquisition strategy, although occasionally jaw-dropping, appears to be working. Instagram is now believed to be worth $35 billion compared to the $1 billion Facebook bought it for.

This post has been updated with more information from Facebook’s earnings call.

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