With many Ad Networks reporting Facebook mobile came in at 35% of client spend in the quarter and a few even seeing 40%, we see potential upside risk to both our mobile estimate and consensus. Our contacts again reported meaningful sequential growth in spend with Facebook, with performance of the entire Facebook platform beginning to rival that of search for some of our contacts’ clients. Analysts expect mobile ad revenue of $425mn, up 13% qoq and representing 30% of total ad revenue for 2Q13, similar to last quarter. For the desktop business (which consists of news feed ads as well as right hand rail), we expect revenues of $994mn, up 14% qoq and up 1% yoy
For many, App Install ads were a key driver of mobile performance, with custom audiences and FBX continuing to deliver improved performance and to drive incremental spend. On the CPM front CPMs of $5.00, down from $5.25 last quarter, which implies Mobile CPMs in the US are roughly double those outside the US given there are fewer auction participants outside the US, which lowers price competition. The estimated desktop revenue of $994mn and impressions of 6,190bn implies CPMs of just $0.16, down 25% yoy.
As for Zynga’s contribution to Payments segment revenue, we expect it be $62mn, down 22% qoq and down 37% yoy. This accounts for the agreement that Zynga takes 70% and Facebook 30% of a user’s purchase.
Facebook is at the center of the mobile ad revolution. While we still expect engagement growth to remain at somewhat muted levels given its 1bn+ users, worldwide mobile daily active users (DAUs) see roughly 1.6 mobile ads per day on average in 2Q13, up from 1.5 in 1Q13. We see significant opportunity for FB to drive higher pricing on its ad units as brand and direct marketers alike take advantage of its broad reach and precise targeting.