Facebook beats projections on new ad formats; shares rally

Profit exceeds estimates as Facebook lured more advertisers to its mobile services, sending shares up 21%
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First Published: Thu, Jul 25 2013. 08 41 AM IST
Facebook’s second-quarter revenue rose 53% to $1.81 billion, the company said in a statement on Thursday.
Facebook’s second-quarter revenue rose 53% to $1.81 billion, the company said in a statement on Thursday.
San Francisco: Facebook Inc. reported sales and profit that exceeded estimates as the operator of the world’s most popular social-networking service lured more advertisers to its mobile services, sending shares up as much as 21%.
Second-quarter revenue rose 53% to $1.81 billion, the company said in a statement on Thursday. Second-quarter profit excluding certain items was $488 million, or 19 cents a share. Analysts had projected profit of 14 cents on sales of $1.62 billion on average, according to data compiled by Bloomberg.
Concern about Facebook’s ability to capitalize on the shift to mobile devices from personal computers has weighed on the company’s shares since its $16 billion initial public offering (IPO) last May, the largest technology IPO on record. Chief executive officer Mark Zuckerberg’s efforts to focus the company on ads for tablets and smartphones is starting to pay off, according to Paul Sweeney, an analyst at Bloomberg Industries.
“Finally, the blowout quarter that Facebook bulls have been waiting for,” Sweeney said. “Among many impressive data points, I think investors will focus on the percentage of revenue from mobile of 41%, which was well above consensus.”
Shares of Facebook, based in Menlo Park, California, climbed as high as $31.98. The stock had advanced 1.5% to $26.51 at the close in New York. Facebook, which priced its IPO at $38 a share, saw its stock slump as low as $17.55 in September and was still trading 30% below its IPO before Thursday’s results.
Mobile push
“Mobile will soon account for more than half of advertising dollars,” Zuckerberg said on a conference call. The number of mobile users expanded 51% to 819 million during the quarter. The total number of Facebook members was 1.15 billion, compared with 1.11 billion in the earlier period.
“This quarter represents a strong validation that we’re effectively navigating the shift to mobile,” David Ebersman, Facebook’s chief financial officer, said in an interview. “All the investments we’ve been making in the business have been paying off. Facebook is projected to take 13% of the global mobile-advertising market this year, up from 5.4% last year,” according to EMarketer Inc. Even so, the company remains a distant No. 2 to Google Inc., which is expected to grab 56% of the market in 2013.
Facebook has stepped up efforts with its mobile services, including updates to its smartphone applications and a new video feature for photo-sharing service Instagram. Investors’ concern that the company wasn’t shifting its focus fast enough toward wireless devices weighed on the shares in the four months following its market debut.
Daily users
Net income attributable to shareholders was $333 million, or 13 cents a share, compared with a loss of $157 million, or 8 cents, a year earlier.
More than half, or 61%, of Facebook members use the site daily, a number that has risen even as management projected it would decline, Zuckerberg said on the call.
“As we’ve grown, I always expected our ratio of daily actives to monthly actives would decrease as later technology adopters joined our service,” Zuckerberg said. “The opposite has actually been true.”
Revenue from payments, which includes virtual goods sold in games such as FarmVille 2 and Candy Crush Saga, grew to $214 million in the second quarter, a gain of 11% a year earlier.
Marketing tools
The company lowered its estimate on capital expenditures this year to $1.6 billion, down from its earlier forecast of $1.88 billion, due to efficiency gains and the timing of planned purchases, Ebersman said on the call.
Facebook is also making improvements to its advertising tools for marketers. The company said last month it intends to cut its 27 ad units by more than half, making the promotion- buying process more simple and efficient.
The social-networking provider has been wooing more large advertisers. In April, Facebook won back General Motors Co. as a customer almost a year after the automaker said it was pulling ads off the service.
“It’s been pretty clear for a long time that Facebook could monetize its 1.1 billion users a lot better,” Michael Pachter, an analyst at Wedbush Securities Inc. in Los Angeles, said in an interview. “It may sound simple, but we always knew that if they would just try harder, they could deliver.”
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First Published: Thu, Jul 25 2013. 08 41 AM IST
More Topics: Facebook | advertisers | shares | mobile services | IPO |
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