Facebook Grows Despite Sharp Profit Fall

Facebook has produced a mixed set of financial results, as its focus on growing its mobile audience begins to pay off.

The social network revealed its fiscal Q4 2012 earnings 30 January, reporting non Generally Accepted Accounting Principles (GAAP) profits of $426 million (£269m) worth 17 cents (£0.10) per share. However GAAP net profit were actually down at $64m (£40.5m) compared to $302m (£191m) in the same year-ago quarter.

Meanwhile fourth quarter revenue rose 40 percent to $1.59 billion (£1bn).

Mobile Growth

The full fiscal year results also show mixed results after Facebook brought in a non-GAAP net profit of $1.3 billion (£820m), up from $1.2 billion (£760m) in 2011. However looking at the GAAP figures, Facebook posted a net profit of just $53m (£33.5m), a massive drop from the $1bn (£633m) for 2011.

But there was healthy grow in full year revenues at $5.1 billion (£3.2bn), up from $3.7 billion (£2.3bn) in 2011.

Much of that rise in income was due to improved advertising and services on mobile devices, CEO and founder Mark Zuckerberg said on a conference call to analysts and journalists. The company also has invested a substantial amount in product development over the last 12 months, Zuckerberg said.

Revenue from mobile apps accounted for 23 percent of Facebook’s advertising revenue – up in strong fashion from 14 percent the previous quarter. And, for the first time in its nine-year history, Facebook charted more daily active users on mobile apps this quarter than from Web visits.

This was exactly what the company wanted to demonstrate to investors: that it can indeed grow its business with ads that work on smaller devices.

Facebook, originally designed for desktop and notebook screens, has invested a lot of time and effort in simplying both its conventional and contextural advertising products. Sponsored news stories are also paying off.

“I just think the mobile number is really terrific for us,” Facebook CFO David Ebersman told AllThingsD. “It’s such a great foundation for us, given our belief that 2012 was a year of transforming ourselves into a mobile company. And that’s really where the future is going to be.”

User Activity

It’s true at least in terms of user activity: For the first time this quarter, daily active users on mobile surpassed that of Web visits to the site. Facebook reported 680 mobile monthly active users in Q4, of which 157 million were exclusively mobile.

Wall Street’s outlook coming into this report was optimistic, with a consensus of analysts projecting a 34 percent upsurge in revenues from Q3 at about $1.525 billion (£965m). Facebook, however, outperformed those estimates, coming in at $1.59 billion (£1bn).

Like Apple, Google and VMware before it this week, investors immediately started to sell, with the stock slipping down about 7 percent and then back up to between 4 and 5 percent lower in after-hours trading. The stock closed at $31.24 (£19.77) and was selling for $30.22 (£19.12) at 4:30 pm Pacific time after hours.

Nonetheless, it was a strong showing to close out the quarter and fiscal year for the Menlo Park, Calif.-based social network and Web services provider.

Analyst Viewpoint

“Facebook Q4 2012 results give cause for optimism and suggest the company is on the right track following its disappointing IPO and the lackluster two quarters that immediately followed,” Eden Zoller, a principal analyst at Ovum, told eWEEK in an email.

“What stands out from Facebook’s Q4 results is the centrality of mobile for its service strategy and growth,” said Zoller. “Walmart alone delivered 50 million mobile ads to customers. This solid progress on the mobile advertising front should be applauded.”

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Originally published on eWeek.