Facebook earnings: Revenue up 60 percent as social network expands its mobile audience


Since Facebook’s initial public offering last year, the firm has faced lingering Wall Street skepticism that it will develop a profitable advertising strategy. Wednesday’s earnings could help address some of those concerns. (Justin Sullivan/GETTY IMAGES)
October 30, 2013

Facebook reported a 60 percent jump in third-quarter revenue Wednesday, driven by the social network’s growing success in capturing a mobile audience.

The number of active monthly Facebook users climbed 18 percent overall during the quarter but spiked 45 percent on mobile devices. Advertising profits jumped 66 percent year over year, with 49 percent of that revenue coming from mobile.

Since its initial public offering last year, the firm has faced lingering Wall Street skepticism that it will develop a profitable advertising strategy. Wednesday’s earnings could help address some of those concerns.

After closing down slightly at about $49 a share Wednesday, the firm’s stock shot up 15 percent after the earnings report was released. The results beat analysts’ expectations.

“The strong results we achieved this quarter show that we’re prepared for the next phase of our company,” Facebook chief executive Mark Zuckerberg said in a statement.

In the past year, the company has rolled out half a dozen major changes to where and how it displays ads, an overhaul aimed at cheering marketers unhappy with mixed Facebook returns.

“This comes down to proving advertising value to marketers,” said Nate Elliott, vice president and principal analyst at Forrester Research. “Facebook’s baseline concern is always keeping users engaged, and they’re good at that. . . . But at the end of the day, the question I’m asking is how they’re going to achieve parity with the rest of the online market.”

According to Forrester’s research, businesses in the United States, Canada and Britain are less satisfied with Facebook ads than with any other type of marketing, including marketing through Facebook competitors such as Google, LinkedIn and Twitter. A report by Adobe Digital Index based on 131 billion Facebook ad impressions found that marketing referrals from Facebook fell 20 percent in 2013 while referrals from Pinterest and Twitter jumped substantially.

That is worrisome, analysts say, because more than 88 percent of Facebook’s revenue in the second quarter came from advertising. That number inched slightly higher, to 89 percent, in the third quarter.

Facebook has responded with a slate of new advertising tools, including FBX, the real-time exchange that surfaces Facebook ads based on users’ past browsing behavior. The company also recently renovated its “mobile app ads,” which encourage users to download and use advertisers’ apps from their news feed.

And last week Facebook previewed how its long-anticipated ads will look on Instagram, which the social network bought in April, and promised a wider rollout to the photo-sharing app’s 150 million active users in the near future.

Several major companies, including General Electric and PayPal, have signed on for the pilot, which — according to the Pew Research Center’s latest report on Instagram usage — will reach 18 percent of American cellphone owners.

Those moves have pleased investors and analysts, who rank app download activity, Instagram monetization and video advertising among the company’s “key growth initiatives,” Merrill Lynch analyst Justin Post wrote in a research report.

Caitlin Dewey runs The Intersect blog, writing about digital and Internet culture. Before joining the Post, she was an associate online editor at Kiplinger’s Personal Finance.
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