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Facebook reports steep drop in profit

The company reports a $64 million profit in the fourth quarter of last year
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First Published: Thu, Jan 31 2013. 10 55 AM IST
More than 600 million people used Facebook daily—a 28% increase from the previous year, with the rise driven by mobile, the company said.
More than 600 million people used Facebook daily—a 28% increase from the previous year, with the rise driven by mobile, the company said.
Updated: Fri, Feb 01 2013. 12 35 AM IST
Facebook Inc. is increasing its revenue from mobile with more users now accessing the social network via smartphones and tablets than from personal computers, but Wall Street remains unimpressed.
The company on Wednesday reported a $64 million profit in the fourth quarter of last year, a steep drop compared with $302 million a year earlier, while revenue grew 40% to $1.585 billion.
But expenses jumped 82% to $1.06 billion and will keep rising given Facebook’s plan to hire aggressively and invest heavily in data centres. Wall Street’s response in after-hours trade was to push the stock down. The shares fell 3.46% to $30.16 in electronic trades.
Facebook said earlier that its number of mobile users jumped 57% from a year ago to 680 million, and for the first time surpassed the number using computers, which came in at 618 million on average for December 2012. More than 600 million people used Facebook daily—a 28% increase from the previous year, with the rise driven by mobile, the company said.
But the number of people connecting to Facebook from desktop computers was “flat or declining,” executives said during an earnings call with analysts.
“The big thing for us is we have more than a billion people using our product and we need to make Facebook really good across all the devices they use,” said co-founder and chief executive Mark Zuckerberg.
But he ruled out Facebook making its own phone, “because it is not the right strategy for us,” though he said the social network “became a mobile company” last year and by the end of December had 1.06 billion monthly users overall.
About 23% of Facebook’s ad revenue came from mobile devices, affirming the company’s efforts to find ways to make money from the unrelenting trend of relying on smartphones or tablets to get to the Internet.
That figure was up sharply from 14% in the third quarter.
Ovum principal analyst Eden Zoller indicated that the figures were a boost for a company that took a pounding last year after a much-hyped stock listing fell flat.
“What stands out from Facebook’s results is the centrality of mobile for its service strategy and growth,” he said. “This solid progress on the mobile advertising front should be applauded as a key challenge for Facebook has been how to monetize its growing mobile user base.”
Facebook played up the number of monthly active users, especially those connecting on smartphones or tablets.
Jon Ogg at 24/7 Wall Street, however, said investors “may raise some brows after seeing the margin compression, although some of this was known due to hiring and expense items.”
Zuckerberg said in September that Facebook was focused on mobile devices and should be seen as a smart bet despite a “disappointing” stock market debut.
“It is really clear from the stats and my own personal intuition that a lot of energy in the ecosystem is going to mobile, not desktop (computers),” Zuckerberg said at the TechCrunch Disrupt conference in San Francisco.
“That is the future,” he continued. “We are going to be doing killer stuff there.”
Zuckerberg was adamant that the company was being underestimated and was on track to make “more money on mobile than we make on desktop.”
His appearance at the conference marked his first public interview since the massive public offering on 18 May that was hotly anticipated—but ended up being a flop. Facebook shares quickly sank to less than their value since the IPO at $38 a share but had been climbing their way back prior to the results on Wednesday.
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First Published: Thu, Jan 31 2013. 10 55 AM IST
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