Facebook’s sales beat estimates on mobile ad success
Facebook spent the last year adding ways for advertisers to reach consumers as they devote more time on wireless devices than desktops.
Facebook’s fourth-quarter revenue topped analysts’ estimates as mobile-advertising sales on the world’s largest social network surpassed those on desktop computers for the first time.
Revenue rose 63 percent to $2.59 billion. Profit excluding some items was 31 cents a share, the Menlo Park, Calif.-based company said Wednesday. Analysts on average had projected sales of $2.35 billion and profit of 27 cents a share, according to estimates compiled by Bloomberg.
Facebook, which counts about half the Internet-connected population as users, spent the last year adding ways for advertisers to reach consumers as they devote more time on wireless devices than desktops. Mobile promotions generated $1.25 billion and accounted for 53 percent of advertising revenue, compared with 49 percent the previous quarter.
“Mobile is so key for them,” said Laurence Balter, an analyst at Oracle Investment Research who has a hold rating on the stock. “It’s going to be a big battle between Facebook and Twitter, and it’s Facebook’s game to lose.”
Facebook rose as much as 12 percent in extended trading. The stock declined 2.9 percent to $53.53 at the close in New York. The shares more than doubled in 2013, compared with a 30 percent gain in the Standard & Poor’s 500 index.
Net income rose more than eightfold to $523 million, or 20 cents a share, from $64 million, or 3 cents, a year earlier.
“The investments we’ve made to improve our mobile products are paying off,” David Ebersman, Facebook’s chief financial officer, said in an interview. “We still feel like we’re really early and very much in investment mode in terms of what we’re trying to build here.”
Even with more digital-ad spending anticipated, Facebook has been limiting the number of ads shown in a user’s main stream of messages, known as the News Feed, to avoid alienating users. That pressures the company to increase the effectiveness of their promotions and charge more for them, according to Robert Peck, an analyst at SunTrust Robinson Humphrey.
Facebook said it would seek to boost the quality, or relevance of advertisements, rather than quantity, which in turn would let the company charge more for promotions. Some of that’s already happening, Ebersman said, with the average effective price of ads up 92 percent compared with the previous year.
For many users, Facebook is no longer a shiny new service. The company next week will celebrate 10 years since Chief Executive Officer Mark Zuckerberg founded the social network in a Harvard University dorm room. The company had 1.23 billion monthly active users in December — a 16 percent increase from the previous year — with 945 million of them on mobile phones.
Facebook has said that younger teens aren’t using its website as much as they used to.
The company last year offered $3 billion to acquire Snapchat, an application popular with teens for sending annotated photos that disappear, which the startup turned down, a person familiar with the matter has said.
“If Facebook isn’t a teen product, then the teens are using Instagram, which is also owned by Facebook, so I think the fear is a little exaggerated,” said Eric Steiman, who owns Facebook in a portfolio of $5.5 million at Covestor Ltd. “The number of people on the platform is truly remarkable.”