Facebook Reaps Reward From Mobile Ad Growth

Facebook has posted impressive second quarter results that have beaten Wall Street expectations, which in turn prompted a healthy, albeit brief, rise in its share price.

The social networking giant once again benefited from its growing mobile advertising revenue stream.

Share surge

For the second quarter ending 30 June, Facebook posted a GAAP net profit of $333m (£217m), compared to a net loss of $157m (£102m) in the same year-ago quarter. There was equally good news on the sales front, after revenues grew 53 percent to $1.8bn (£1.2bn) from $1.2bn (£773m) a year ago.

Wall Street analysts polled by Thomson Reuters had been expecting the company to report revenues of $1.62bn (£1.06bn). Predictably, the market was delighted, and shares in the company rose 20 percent on the Nasdaq to reach $30.95 (£20.13) in after hours trading.

This share rise meant that Facebook finally managed to crawl closer to the $38 (£24.82) per share it set during its controversial initial public offering (IPO) in May 2012. However, shares in the company are now currently back down to more familiar territory at the $26.51 (£17.24) mark.

“We’ve made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile,” said Mark Zuckerberg, Facebook founder and CEO. “The work we’ve done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future.”

Facebook fatigue?

The Menlo Park, California-based company took the opportunity to dispel any notion of Facebook fatigue, and said that its daily active user base in June stood at 699 million on average, an increase of 27 percent year-over-year. Monthly active users reached 1.15 billion in June, an increase of 21 percent year-over-year.

And mobile active users on a monthly basis 819 million in June, an increase of 51 percent year-over-year. Daily logins from mobile devices reached 469 million on average for June 2013.

But it was in advertising that Facebook saw the most significant improvement. It said its quarterly revenue from advertising reached $1.6bn (£1bn) billion, representing 88 percent of total revenue and a 61 percent increase from the same quarter last year.

And the hot growth area for advertising was in mobile advertising, a point made by Facebook earlier this month when it boasted about a big jump in mobile usage across the UK.

According to Facebook, its revenues from mobile advertising represented approximately 41 percent of total advertising revenue for the second quarter of 2013.

Previous studies have questioned the value of advertising on Facebook.

Industry reaction

“The fact that Facebook is generating over a third of its revenue from mobile is testament to its success, effectively treading the fine line between offering relevant promotions, without being regarded as intrusive,” said Marco Veremis CEO of Upstream.

“Yet, despite these encouraging figures, they will become largely redundant if Facebook continues to lose subscribers and fail to win new users.

“Facebook penetration in Western markets has reached a point of saturation, but Facebook needs to monetize these existing users and keep them engaged keeping a balance between what it can offer to brands and having a seamless user experience – hence the launch of multiple ad products like the mobile newsfeed, sponsored stories, the rumoured introduction of video ads and of course Facebook Home.

“Additionally, Facebook needs to continue doing everything it can to acquire more customers in new markets.”

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