Facebook 2014 Annual Report Download - page 47

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personal computers. We expect Facebook usage on personal computers will continue to decline in the future, which we expect to result in a decline of
our Payments revenue.
2013 Compared to 2012 .
Revenue in 2013 increased $2.78 billion, or 55% compared to 2012. The increase was due primarily to a 63% increase
in advertising revenue during 2013 as compared to 2012.
The most important factor driving advertising revenue growth was an increase in revenue from ads in News Feed on both mobile devices and
personal computers. News Feed ads are displayed more prominently, have significantly higher levels of engagement and a higher price per ad relative to
our other ad placements. In 2013, we estimate that mobile advertising revenue represented approximately 45% of total advertising revenue, as compared
with 11% in 2012. Other factors that influenced our advertising revenue growth in 2013 included an increase in the number of marketers actively
advertising on Facebook, which we believe increased demand for our ad inventory, and a 22% growth in average DAUs from December 2012 to
December 2013.
In 2013 compared to 2012, we increased the number of ads shown by 20% and the average price per ad by 36%. The increase in average price per
ad was driven primarily by the increased number of News Feed ads on both mobile devices and personal computers, offset partially by product changes
including our decision to lower the market reserve price, i.e. the minimum price threshold accepted in our auction. The increase in the number of ads
shown was driven by user growth and the reserve price change, partially offset by a shift towards more usage on mobile devices, where we show fewer
ads than on personal computers.
Payments and other fees revenue in 2013 increased $76 million, or 9%, compared to 2012. The increase in Payments and other fees revenue is a
result of increased Payments revenue from games played on Facebook on personal computers, and to a lesser extent, the inclusion of other fees revenue
in 2013 from user Promoted Posts and our ad serving and measurement products.
In 2013, we generated approximately 46% of our revenue from marketers and developers based in the United States, compared to 51% in 2012.
The change is due to a faster growth rate of international users and to the expansion of international sales offices and payment methods. The majority of
our revenue outside of the United States came from customers located in Western Europe, Canada, Australia and Brazil.
No customer represented 10% or more of total revenue during the years ended December 31, 2014 , 2013 , and 2012 .
Cost of revenue
2014 Compared to 2013 . Cost of revenue in 2014 increased $278 million , or 15% , compared to 2013
. The increase was primarily due to
operational expenses related to our data center and technical infrastructure and increased amortization of our intangible assets. These increases were
partially offset by items related to data center lease abandonment: we reversed $34 million of lease abandonment expense in 2014 due to our decision to
re-occupy and utilize a previously exited data center, compared to a recognition of $117 million of lease abandonment expense in 2013.
2013 Compared to 2012 .
Cost of revenue in 2013 increased $511 million, or 37%, compared to 2012. The increase was primarily due to
operational expenses related to expanding our data center and technical infrastructure, including a $275 million increase in depreciation in 2013. In
addition, we recognized $117 million of lease abandonment expense in 2013 primarily due to exiting certain leased data centers resulting from the
migration of operations to our own data centers. The increase in cost of revenue in 2013 was partially offset by a $46 million decrease in share-
based
compensation expense compared to 2012.
In 2015, we anticipate that the cost of revenue will increase at a higher rate than it increased in 2014 as we expand our data center capacity and
technical infrastructure to support user growth, increased user engagement, and the delivery of new products and services. Additionally, we also expect
an increase in amortization of our intangible assets.
44
Year Ended December 31,
2014
2013
2012
2014 vs 2013
% Change
2013 vs 2012
% Change
(dollars in millions)
Cost of revenue
$
2,153
$
1,875
$
1,364
15
%
37
%
Percentage of revenue
17
%
24
%
27
%