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A lot of people misunderstood you. physcab isn't talking about gaming on Facebook. He's talking about Game of War and Clash of Clans, which are both mobile games. Like another poster has said, games are 75% of the top grossing on the App Store. And absolutely most of Facebook's revenue, if not literally all of it, is mobile gaming ads (especially slot machines).

I'm not sure if the gaming industry is driving the growth per se. Based on my experience, it's really people buying into smartphones and paying for software (in the form of IAP in games) for the first time in their lives.

To be pedantic, people going upmarket in Android is probably their source of growth in revenue. iOS has been pretty rich for a while now and it's unlikely that there are users who are spending more or more users who have started spending. But Android had a HUGE amount of space to grow in terms of Android phone owners who actually spent money (based on numbers I've seen in 2015). I would imagine that's where the money's coming from—the average Android user has gotten a little richer, started spending more on IAP on Android, and therefore game developers bid higher on ads targeting them.

It's like Upstream Color, except instead of a mind altering slug drug, it's Slots Vacation.

> He's talking about Game of War and Clash of Clans, which are both mobile games. Like another poster has said, games are 75% of the top grossing on the App Store. And absolutely most of Facebook's revenue, if not literally all of it, is mobile gaming ads (especially slot machines).

This is false.

Facebook's revenue in 2015 was $17.9 billion. Total mobile gaming revenue for 2015 was approximately $25 billion [1]. Unless mobile game companies spend most of their revenue on Facebook ads, this can't be true.

[1] http://fortune.com/2015/01/15/mobile-console-game-revenues-2...

The poster claimed the growth was being driven by gaming. This quarter showed a 30% revenue increase over the previous year. If the gaming industry were to be responsible for the entire growth, they would only need to have spent 1.2 billion more than they had the previous year in Q4. If facebook were to see a 30% increase this year overall, they would only need to spend about $6 billion more this year (or about 25% of their profits).

Given that Supercell spends about 50% of their profits on marketing overall (which amounts to $500 million) this is plausible. Especially since you can further reduce the total cost by noting that physcab only stated that most of the growth was being fueled by gaming.

http://venturebeat.com/2015/04/27/why-king-and-supercell-spe...

EDIT: However, after reflecting on this, this seems entirely backwards. I believe that physcab was claiming that it was games displaying mobile ads. Thus Facebook is paying the gaming industry, not the other way around.

Disagree with many of these sentiments here. As a performance marketer, and someone who also was in the games industry:

FB Gaming market has flattened. FB has taken numerous methods to rely less on gaming revenue. FB revenues was 10% from game companies when the company went IPO. Much less now, not even mentioned.

Mobile is good at driving mobile installs at scale, limited competitors here. But as a general performance marketing channel, they do better at ecommerce and consumer focused businesses.

Most of FB advertising revenue is coming in from Brand marketing. Performance is steadily growing, but not as you suggest, the reason for this growth.

> FB still is the only reliable source for advanced targeting of ads. This has massive impact on ROI for performance marketers.

A few years ago, a report came out saying that approximately 6% of Facebook advertisers were actually seeing a positive ROI. A more recent survey of small businesses [1] showed that 41% felt they received some positive ROI. These numbers suggest that Facebook advertisers are likely losing billions of dollars per year overall. There just happens to be a large glut of capital out there willing to chase metrics other than ROI right now - things like brand recognition and app installs. Eventually though, some people are going to notice that they are losing money, and the gravy train may at least slow down.

[1] http://www.manta.com/resources/research/social-media-marketi...

A lot depends on how well you can model attribution. If you're measuring last-click, you're going to see a wildly different story than if you can measure the impact the measure of a impression, mid-stream click, etc. I'd guess most small businesses are not invested in developing stronger attribution models, so looking at Facebook spending vs. something like paid search, as apples-to-apples, is going to make Facebook look worse than it likely is. That's not to say advertisers aren't chasing metrics other than ROI, but just calculating an accurate ROI can be something beyond the scope of many.

Pretty sure gaming is NOT where Facebook's revenue growth is coming from. Almost all the growth has been coming from mobile advertising for a couple years now.

Here's an exercise. Go to the App Store, click on Top Grossing. Out of the 150 apps displayed, how many are gaming-related? I counted 113. Thats 75%. I don't have the charts but you can compare this to a year ago period. My guess is that percentage has grown. This is not an accident.

FB gaming is dead. It's not the reason why their revenue is growing.

He's not talking about FB gaming. He's talking about mobile games.

Mobile games that are not played on Facebook are paying Facebook for ad space so that they can reel in additional whales. Games like Clash of Clans & Gears of War.

To be fair, gaming _is_ a big fraction of mobile advertising

who spends the money on most of those ads?

Game companies.

If what you are saying is true, then it's phone apps (games) driving this revenue. In that case, it seems to me that one should actually buy Apple stock. Because phone apps will only spend this kind of money on Facebook ads if they are able to generate RoI in the app store via in-app purchases. And Apple gets a 30% cut of that without doing anything. So Apple must be making as much revenue as Facebook from this phenomenon.

Applies equally to Google

How does SuperCell earn money on FB's platform? Afaik all of their games are iOS and Android only and I've never seen a display ad of any kind in Boom Beach (the only SC game I've played) although admittedly I don't sign in via FB.

Supercell, like most big mobile gaming companies, make their money on in-app purchases. Someone leaked SC's internal dashboard 2 years ago [1]. At the time they were making $5M a day in rev just in CoC. You can get App Annie estimates of revenue for other companies pretty easily, but last I checked SC was able to dramatically increase LTV of users over the years so this has likely grown.

[1] https://recodetech.files.wordpress.com/2014/02/supercell-hac...

I'm not contesting that SC makes millions every day from in-app purchases, just pointing out that the money is presumably split with Apple and Google not Facebook. Although you can login to Clash of Clans with your Facebook account, it is not a Facebook game.

He's saying that they spend a large % of their revenues on Facebook mobile app-install ads.

Thanks!

Thank you for the most sane and objective post in this thread that's actually backed by industry knowledge and not just blind hatred.

I wonder what happened in their 4th quarter though. They seem to have seriously clamped down on expenses. I wonder if this is an actual policy effect or just somehow they skipped building datacenters in Q4.

Machine Zone and Supercell are not doing $3.6 billion per year on Facebook. That's pretty absurd to claim without backing it up with a lot of proof.

I couldn't edit my comment but you're right. I meant $5M-$10M per month. But the mobile gaming industry as a whole is a huge revenue driver, probably 20%-30% of FB's quarterly rev.