Facebook Just Had Another Record Quarter, and It Has Apple to Thank

Facebook CEO Mark Zuckerberg gestures while delivering the keynote address at the f8 Facebook Developer Conference Wednesday, April 30, 2014, in San Francisco. Ben Margot/AP

Once upon a time, Facebook was struggling. Mark Zuckerberg had taken his young company public in one of the most anticipated IPOs of the past 10 years, and shares floundered. Facebook was bringing in money from ads on the desktop, but the desktop wasn’t where people were moving. They were moving to their phones, where no one—including Facebook—had figured out how to make ads work.

That’s not true anymore. Yesterday, Facebook reported yet another quarter where its revenue rose to a record high. Most significantly, mobile ad revenue doubled compared to the same time last year, breaking $2 billion for the first time.

Facebook deserves a lot of credit for figuring out new ways to make smartphones a true home for its ad products. But over the past three months especially, the company may be benefitting from a major assist. Apple posted record profits this week largely thanks to sales of its new iPhones with bigger screens. On those screens, Facebook’s ads look better than ever.

For years, mobile ads have riled even the most powerful online companies. The “cost per click” of a Google ad, for example—one of the key measures of an online ad’s value—has dropped steadily as users move to mobile devices. On phones, sites haven’t shown the same ability to draw in users, since ads simply can’t command the same kind of real estate on smaller screens. But that downward trend shows signs of abating.

Adobe, the same software maker that brought the world Photoshop and Flash, also does a brisk business in showing advertisers how well their online ad campaigns are doing. In a recent survey, the company says it analyzed 500 billion ad impressions on Google and Yahoo/Bing along with 400 billion post impressions on Facebook.

Among the findings: starting in September, after flat-lining for the first two-thirds of the year, cost-per-click rates on Google and Yahoo started climbing. For the quarter, cost-per-clicks were up 8 percent overall and 6 percent on smartphones. The rise isn’t huge, but the change in direction is significant, especially if the trend continues. Mobile ads are finally becoming more valuable.

How can that be? Considering we the media covered the event like the tech version of the Super Bowl, few people don’t know that September was also when Apple introduced the iPhone 6 and 6 Plus to the world. Granted, the idea that those bigger screens immediately translated into higher value for online ads is a stretch. But seeing as Apple reported yesterday selling 74.5 million iPhones during the last quarter, it’s less of a stretch to imagine the spread of those bigger screens having an impact over time.

For Facebook and Google, which reports its earnings today, the importance of the new, larger iPhones’ popularity is tough to overstate. Yes, Apple isn’t the first company to make a smartphone with a big screen. But iPhones command the high end of the consumer market—that is, people with money to spend, which are people advertisers most want to reach.

And despite having only a modest share of the overall mobile market compared to Android, iOS users have historically shown themselves to be far more engaged users. That is, they interact with their phones more, which makes them especially likely to respond to ads—ads that now happen to be bigger.

Finally, no other handset maker has quite the ability, at least in the US, to move users from one device to another en masse. Over the last three months, Apple has migrated millions of mobile users onto bigger screens, the screens where Facebook’s ads work best. “Other players can come in and make little ripples,” Adobe Digital Index principal analyst Tamara Gaffney tells WIRED. “When Apple comes in, it makes a tidal wave.”