Facebook has disproved one of the laws of business over the last year

Advertisement

Most successful businesses run into the law of large numbers. That is, the larger you get, the harder it is to show the same percentage growth year after year. There are only so many people in the world, only so many adjacent businesses to move into.

Advertisement

Facebook, so far, is an exception. Check out this chart of quarterly revenue (bars) and annualized revenue growth by quarter (the line) since the company's IPO in Q2 2012:

bii fb revenue and growth by quarter 2q16

BI Intelligence

Complimentary Tech Event
Transform talent with learning that works
Capability development is critical for businesses who want to push the envelope of innovation.Discover how business leaders are strategizing around building talent capabilities and empowering employee transformation.Know More

Back when Facebook went public, it was growing between 30% and 40% per year. That growth rate accelerated until the beginning of 2014, when it peaked around 70%. Then it started to drop.

This is what you'd expect from most companies generating $10 billion a year in revenue.

Advertisement

But as this chart shows, around one year ago, Facebook's growth started to accelerate again. In the second quarter, it grew revenue 59% - that's the highest growth rate since Q3 2014.

Facebook was able to do this in part thanks to a historic (and rare) platform shift - in this case, from desktop internet usage to mobile usage. This quarter, 84% of Facebook's ad revenue came from mobile platforms. A year ago, it was 76%. When it went public four years ago, Facebook had no mobile advertising business at all.

But it's also executed well, optimizing its product to generate the yield from the ads it shows. This is harder than it sounds - throw too many ads in front of users, and they'll leave.

In fact, that shift may have reached its peak: the company warned on its Q2 earnings call on Wednesday that ad revenue might start decelerating again simply because it cannot load any more ads into people's news feeds.

NOW WATCH: Elon Musk just unveiled Tesla's 'top secret' master plan - here are the details