Facebook earnings beat expectations as ad revenues soar

Secret Side Of Facebook

Facebook comfortably beat Wall Street expectations on Wednesday, announcing that its once-struggling mobile business now accounts for 62% of advertising revenues.

“We had a good second quarter,” said Mark Zuckerberg, Facebook's founder and CEO. “Our community has continued to grow, and we see a lot of opportunity ahead as we connect the rest of the world.”

Revenue for the quarter ending June 30 totalled $2.91bn, an increase of 61% over the $1.81bn reported in the same quarter of 2013. Excluding the impact of year-over-year changes in foreign exchange rates, Facebook said revenue would have increased by 59%.

The social network announced net income of $791m for the latest quarter, up 138% compared to $333m for the same period last year.

The number of Facebook’s monthly active users reached 1.32bn as of June 30 an increase of 14% year-over-year. The number of daily users was 829m, up 19% year on year. Facebook said the number of mobile users topped 1.07bn at the end of June.

On a conference call with analysts Zuckerberg said people in the US spend nine hours a day on digital media, but less than an hour on Facebook. “One thing that’s exciting is there is still so much room to grow,” he said.

Advertising revenue rose 67% to $2.68bn compared to the same quarter last year. Doubts about Facebook’s ability to make money from adverts on mobile, the fastest growing area for the company, were a major factor in the company’s embarrassing share price collapse after its initial public offering in May 2012. Mobile ads now account for 62% of ad revenue, up from 41% for the same quarter last year.

Research firm eMarketer calculates that Facebook accounted for a 5.8% of worldwide digital advertising revenues in 2013, up from 4.10% in 2012. It is expected to reach nearly 8% by the end of this year. Digital advertising spending globally increased 14.8% to $120.1bn in 2013 and is expected to grow another 16.7% this year to reach $140.2bn.

Facebook is almost entirely reliant on advertising for revenues. Payments and other fees totalled $234m in the quarter, a 9% increase from the same quarter last year. But there are signs that it is looking to broaden its income streams by adding more e-commerce to the site.

Earlier this month Facebook announced the introduction of a “buy” button that will allow users to purchase items in adverts or other posts without leaving the social network.

Chief operating officer Sheryl Sandberg said the buy button was a “small experiment.” “Commerce is really important to us,” she said. "But I don’t think people should confuse this with Facebook selling things directly.”

Forrester research analyst Melissa Parrish said the results were impressive but she was keen to see how Facebook would differentiate itself from other advertisers. “Mobile advertising is potentially really interesting,” she said. “At the moment its ads that get you to click to download other people’s apps. That makes sense but there are only so many apps people want to download.”

She said Facebook was one of the very few companies positioned to take mobile advertising to the next level which she said consisted of “deeply integrated, highly personalised, content-based ad products.”

Powered by Guardian.co.ukThis article was written by Dominic Rushe in New York, for theguardian.com on Wednesday 23rd July 2014 22.01 Europe/London

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