Facebook ad revenue is on the way up, according to a new note from Mizuho tech analyst James Lee.
The company is predicting Facebook will show 8 percent ad revenue growth compared with last quarter, above the 6 percent consensus estimate.
Facebook is projected to make $17.37 billion in U.S. digital ad revenue this year, according to eMarketer. Facebook also takes home 20.9 percent of U.S. digital ad revenue, ranking it second behind Google. (Facebook reports earnings on Nov 1.)
Growth in ad revenue is partially attributable to two sources: Facebook mobile and Instagram ads. Facebook mobile ad CPMs — a unit of ad price measurement based on 1,000 impressions — increased 29 percent quarter over quarter to $5.66, according to a leading digital agency Mizuho spoke with. Instagram also saw gains and went up to $5.46, up 23 percent.
The digital agency sources attributed the mobile ad price increase to Facebook's efforts to moderate ad load, or prevent the platform from becoming oversaturated with ads. When platforms have too many ads, users get turned off.
Instagram's increases were due to more demand for entertainment ad space, according to the note. Most of Facebook's ads are bought auction-style, meaning more demand increases the price. Entertainment is the biggest vertical for advertisers across all of Facebook's properties, making up 39 percent of advertiser spend, Mizuho said. More companies were also using direct response Instagram ads, which encourage users to take action immediately including to "shop now" or "learn more," Mizuho pointed out.
Mizuho maintained its buy rating on Facebook.