Facebook Posts Losses But Improves On Mobile

On Tuesday, Facebook has reassured investors by reporting that its mobile advertising revenue grew several times faster than expected in the third quarter.

The company said 14 percent of its advertising profits now come from mobile, which is a clear sign that the social network has found a way to make money from smartphone and tablet users, something it struggled with in the past.

The announcement drove the Facebook share price up nearly 13 percent, to $22.19 on Tuesday. Shares still have a way to go to reach the $38 IPO price, however.

Overall, the result for the third quarter was negative, with $59 million net loss blamed on taxes, but it still came above analyst expectations.

Ups and downs

Following Facebook’s infamous May IPO, the confidence of investors was undermined by reduced earnings projections, and the impact of user migration to mobile platforms, where advertising revenues are lower than on PCs.

As a result, the company’s $100 billion IPO value was reduced to roughly $60 billion in six months.

The social network has been trying hard to find additional sources of income, testing new advertising techniques and even entering the gambling market with the first ever real cash game ‘Bingo Friendzy’. Now, it seems Facebook has finally solved its mobile dilemma.

According to Reuters, the social network reported third quarter mobile advertising revenue of $150 million (£94m), compared with $40 to $50 million in the second quarter. It said that overall advertising revenue increased 36 percent to $1.09 billion (£680m).

Earlier this year, several studies questioned the value of Facebook advertising, and General Motors even cancelled a $10 million campaign, citing low consumer impact.

In spite of this, the total number of ads that Facebook delivered in the third quarter increased 27 percent year-on-year and the average price per ad increased 7 percent.

However, other sources of income haven’t been able to keep up: revenue from payments and other businesses increased just 13 percent to $176 million.

It seems that sorting out its mobile strategy has become a top priority for Facebook. “Over the long run we’re going to see more monetization per time spent on mobile than on desktop,” co-founder and CEO Mark Zuckerberg said in a conference call with analysts on Tuesday.

The company announced that last month, it had reached one billion monthly active users, and over 60 percent were using mobile devices to access the social network.

Zuckerberg also said he wasn’t pleased with revenue from gaming. Zynga, the developer of FarmVille and the company responsible for seven percent of Facebooks’s total revenue, has been struggling to keep afloat. On Tuesday, it announced restructuring measures that would see it cut five percent of its staff and close the Boston development studio.

Meanwhile Instagram, the photography app that Facebook bought earlier this year for around $750 million, has almost quadrupled its user base.

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