What Facebook’s revenue growth means for Latin markets
Facebook’s announced Q4 2013 and full year 2013 revenues and earnings last week. Mostly the results were very good with mobile and online video monetization as the major highlights. But what are the implications for the U.S. Hispanic and Latin American ad markets? What Alberto Pardo, CEO of Adsmovil, Leandro Cruz de Paula, Chief Revenue Officer, U.S. Media Consulting, Germán Herebia, COO REDMAS, Osvaldo Pavez, Regional Digital Director, UM Latam, Roberto Ricossa, VP of Marketing for the Americas at Avaya, Marina Mendez, Regional Director, Mediabrands and other experts have to say.
Translated by Candice Carmel
All of the executives interviewed agree that Facebook’s positive results were expected, due to the time and resources spent by the company on advertising. All also agree that after Facebook announced to anyone who would listen that it is "a mobile company," its earnings gained from mobile advertising are not surprising. The experts generally expect these gains in mobile advertising to continue growing in the coming years. What should we expect for Latin America and the U.S. Hispanic market in terms of the social networks growth and its impact on the sector overall? The same growth trend. Marketing and advertising execs believe that Facebook will continue to reign in Latin America and the U.S. Hispanic market, not only by increasing user numbers, but also by its audience segmentation capacity and advertising solutions offerings, and the engagement that it manages to generate among users in these markets.
Osvaldo Pavez, Regional Digital Director, UM Latam, tells Portada he was not surprised by Facebook’s results given the work his company has been doing in digital marketing: "When talking about Facebook’s results, I analyze it not only from my point of view as a specialist in digital marketing, but also from a business perspective. Facebook has managed to implement a unique business model supported by the wealth of user data it possesses. The detailed information Facebook has about who its users are and how they behave allows for accurately identifying the topics that generate the most"engagement" and those most relevant to advertisers. That’s why I’m not surprised by the high numbers that were recently revealed. These are the fruits of the hard work that Facebook has done globally to strengthen its sales team, and its strategy of working hand in hand with agencies and advertisers to create innovative products."
Roberto Ricossa, VP of Marketing for the Americas at Avaya, agrees: "Surely, these are figures that reflect very good management in the advertising sector. Facebook has focused its business in this regard, implementing intuitive software that targets ads based on user searches or "likes". Moving forward, the big challenge will be to mantain the growth rate against fierce competition and market saturation in social media."
Alberto Pardo, CEO of Adsmovil, adds that "for months prior to its IPO, Facebook hired top executives with significant experience in digital advertising, sales, marketing and technology. It went from being a company focused solely on the product to thinking about how to make money through advertising. It reinvented its ad product several times and it has certainly been a success."
Pedro Quinzaños Cancino, President and General Director of Virket, believes that "Facebook’s recent results show that the social network has adapted to changes in the advertising and mobile devices markets. The latter sector is probably the one that will allow it to continue having stable growth. In 2013, while mobile advertising accounted for 2.7% of the overall ad market, studies anticipate that this percentage will grow to 7.7% in the next two years. Meanwhile, in Latin America, ad placement on mobile devices increased from 2.7% in 2012 to 8.1% in 2013, according to comScore."
For Leandro Cruz de Paula, Chief Revenue Officer, U.S. Media Consulting, "Facebook’s growth is not surprising, given that it has no strong competitors that could unseat it as the leading social network." He also argues that "Facebook has worked hard to increase its mobile solutions for advertisers."
"This is a positive note, not only for Facebook but for the industry as a whole," says Hiram Enriquez, co-founder of Mist | The Content Cloud. "It especially validates the feasibility and efficiency of new models of integrated advertising on social networks at a time when alternatives to traditional media channels that no longer have an audience are desperately needed. This also shows the results of the company’s efforts after the initial setbacks that followed its IPO."
Pedro Cancino Quinzaños at Virket, says that "Latin American and Hispanic users found that smartphones offer them another solution to their need to always be connected and able to socialize. Without going further, Fortune predicts that by the end of 2014, 75% of Facebook’s active daily users will be connected via mobile.
Companies know that mobile advertising is the way, and therefore it is no surprise that Facebook’s mobile revenues have increased by 75%, as their results demonstrate.
"The mobile results are not at all surprising: Facebook announced it would become a mobile company and that 53% will surely reach 65% by the end of 2014, and the same trend will be seen in the LatAm and U.S. Hispanic [market]," says Alberto Pardo, Adsmovil.
Osvaldo Pavez, UM Latam, states: "Mobile is more than a device, it is already a lifestyle, and will play an increasingly important role among consumers, so it is not surprising that more than half of Facebook's revenues come from this sector. The frequency of mobile use is increasing: in Latin America, for example, Wave 7 reveals that smartphones are the undisputed leader with 66% of respondents saying it is the device that best helps them socialize. Facebook has taken advantage of this trend to create better products and brand experiences; they are a company that generates products and services around the mobile world."
Unlike other web platforms, Facebook has managed to successfully integrate its mobile ads as content that is perceived as natural and positive by users, thus generating a better income percentage.
Hiram Enriquez, Mist, agrees that the results are unsurprising. "Last year, Facebook had already announced that almost half (48%) of its daily users connect to the site from their mobile devices. Since both the U.S. Hispanic and Latin America populations exceed the average in their use of these devices, this fact, combined with the tendency to be extremely active on social networks, makes both markets fertile ground for innovation and growth in this sector."
Cruz de Paula, U.S. Media Consulting, thinks that the growth in mobile revenues seems logical. “Smartphone penetration is over 60% in the U.S. and even higher in certain Asian markets, not counting increasing tablet penetration worldwide. Given the substantial growth of mobile media in 2013 ― with 28% smartphone penetration in Mexico, and over 20% penetration in both Brazil and Argentina ― it’s no surprise that mobile advertising is driving Facebook's revenue growth. For advertisers, this means they must weigh their mobile campaigns according to these market conditions in order to take advantage of the ubiquity of these devices and their increasing importance in the lives of Latin Americans."
Marina Mendez, Regional Director, Mediabrands Audience Platform, Latam, also agrees that the social network’s mobile results were not a surprise, "considering that thousands of consumers started their Internet experience by leapfrogging directly to mobile, and have naturalized and shared unique experiences focused on usability, content, access to applications and games, interaction with special ads, and above all, new behaviors that amount to nothing less than geolocation."
Facebook in the U.S. Hispanic market and Latin America
Germán Herebia, COO REDMAS, believes that "Facebook was able to absorb the budgets of other big players in the U.S. Hispanic and Latin American region that have stagnated or fallen away, like MSN or Terra, as well as the relative low audience growth of major local newspapers. Besides, it’s good news for the Latin markets that Facebook in general is earning so much revenue from mobile, because of the spillover effect it can bring to the still incipient mobile advertising industry in the U.S. Hispanic market and Latin America [market]."
Leandro Cruz de Paula, U.S. Media Consulting, believes that "Facebook will be the leading social network in Latin America." The executive says: "According comScore’s 2013 Latin America Digital Future report, Facebook occupies 94% of Latin Americans’ time spent on social networks. Such dominance has probably contributed to the growth of Facebook in 2013 and should continue."
While other social networks are growing in Latin America, they are not monopolizing users’ time at the same level as Facebook, and it is unlikely that this pattern will change in the near future.
Roberto Ricossa, Avaya, believes that "Latin America is one of the fastest growing regions, and in this sense the impact is and will continue to be very strong. Brands are increasingly entering the market in the region, and this creates a higher ad volume on social networks in general, and for Facebook in particular."
Osvaldo Pavez asserts that: "Contrary to what a recent Princeton study revealed about Facebook losing young users, the number of current LatAm and U.S. Hispanic users reflects that Facebook will continue to hold strong as the leading social network, at least for the next 5 years.”
Sporting events like the World Cup and the Olympics in Brazil will generate unprecedented engagement among Latin American and U.S. Hispanic users, which have historically been big fans of soccer and sports in general.
Regarding the World Cup and the Olympics that will soon take place in Latin America, Pavez adds: "Our UM Wave 7 study reveals that television content is the king of "social engagement" in LatAm, with 75% of respondents admitting it is their most talked about subject on social networks. So, we can surely expect an explosion of Facebook conversations generated by the televised broadcast of these sporting events."
Hiram Enriquez, Mist, states: "In Latin America and the U.S. Hispanic segment, we are addicted to social networking. Penetration is comparable to that of regions such as Western Europe, where there is greater Internet penetration in general. Countries like Argentina and Brazil are among those which average more hours per day on social networks. Therefore, we should be on the verge of a turning point in the distribution of advertising and marketing budgets to truly reflect these realities."
Pedro Quinzaños Cancino tells Portada that he believes "Latin Americans and the U.S. Hispanic population find Facebook to be a good tool that allows them to connect with friends and relatives that are far away, and make new friends quickly. The statistics speak for themselves. According to comScore’s "2013 Latin America Digital Future" study, Facebook holds 94% of all user time spent on social networks in Latin America, a region that boasts an annual growth rate of 12% in online audiences, exceeding 147 million unique visitors in March 2013. A very interesting fact, which speaks clearly of where to bet on in terms of online advertising."
He adds that Facebook will continue to grow in the region: "At present, Internet penetration in Latin America is 42.6% and is expected to reach 53.4% by 2016, with annual growth of 13%, according to eMarketer. In other words, more than half of the continent's population does not yet have Internet access. And according to trends, it is estimated that this other half will step directly into Zuckerberg’s social network upon their arrival. In conclusion, the implications of the increasing numbers of connected people will impact ad spending and increase online shopping and consumption, which is good news for the Latin American marketing and digital advertising marketplace, and Facebook is the leading social engine to make it happen."