Facebook's mobile advertising strategy, which some analysts believe should have been in place before it went public in May 2012, is now beginning to instigate some real income.
The world's largest social network zipped right past Wall Street's projections Oct. 30 in reporting its third quarter numbers, showing a 60 percent increase in revenue that it attributed largely to strong growth in its mobile advertising business.
Revenue jumped to $2.02 billion from $1.26 billion a year ago, with $1.8 billion of that specifically from advertising. Net income rose to a solid $425 million (17 cents per share) over a loss of $59 million in the year-ago quarter. Excluding some items, company profits were $621 million (25 cents per share), up from $311 million in the third quarter of 2012.
Revenue from mobile ads that show up in the application on smartphones and tablets comprised half of Facebook's total advertising revenue, amounting to about $880 million. This was a huge increase over the $150 million it earned in the mobile business in the third quarter of 2012, before Facebook had rolled out most of its mobile ad strategy.
Thomson Reuters analysts had expected Facebook to report earnings of 19 cents a share on $1.91 billion in revenue.
Chief Operations Officer Sheryl Sandberg said on the conference call to analysts and journalists that mobile monthly active users increased 18 percent to 1.19 billion from the year-ago period.
"Newsfeed is the most-used app on people's phones by far," CEO Mark Zuckerberg said on the call. "But this is just the beginning. When we get to the point of where people can ask any question to Facebook and have it answered by our community, it's going to be very powerful."
"Investments we have made over last couple of years are now paying off," said Facebook Chief Financial Officer David Ebersman said on the conference call. "The most important thing driving our business are newsfeed ads."
Interestingly, Facebook's stock price was up 14 percent at one point during the conference call, but it slipped back to its original price after Ebersman admitted that the network is seeing a dropoff in the number of younger users. This was documented on a live blog charted by MarketWatch.
Shares climbed as much as 14 percent in extended trading before suddenly falling to $47.40, down 3 percent from its $49.10 closing price.