Facebook’s Mobile Ad Revenue Doubles in 4th Quarter but Stock Falls

Facebook’s fourth-quarter profit may shrunk 79% as the company’s results were dragged down by higher costs, but its revenue got a boost from stronger ad sales on mobile devices.

The most popular social network in the world doubled its mobile advertising from the third quarter as it expanded its business aggressively onto handheld devices. Photo: Franco Bouly/Flickr

However, as Reuters reports, the growth in Facebook profit trailed some of Wall Street’s most aggressive estimates. Extending its reach on mobile devices can appear to be crucial as more and more of its 1 billion-plus users begin to access its network using handsets and tablets.

Specialists claim that Facebook’s overall advertising business grew at its fastest clip since its May initial public offering, thus expanding revenue to 40 percent and surpass Wall Street predictions.

Shares of the social network were flat at $31.24 in after hours trading yesterday, regaining ground after falling more than 8 percent immediately after the numbers were released.

“Overall solid quarter but maybe high expectations going into the quarter,” said Aaron Kessler, an analyst with Raymond James.

Facebook reported that its mobile business accounted for 23 percent of total ad revenue, compared to 14 percent in the previous quarter.

“Mobile revenue was expected to be a little higher,” said Kessler, who said he expected mobile revenue to be 25 percent of total ad revenue.

Finance Chief David Ebersman revealed that the company had “basically doubled” mobile ad revenue from the third quarter to the fourth quarter.

“Two quarters ago we really had no mobile revenue,” Ebersman told reporters in an interview. “In the course of a pretty short period of time, we’ve dramatically ramped up our ability to monetize mobile.”

According to the data released by the social networking site, the total number of its monthly active users reached 1.06 billion at the end of last year, with 618 million daily active users.

Facebook shares, which lost more than half their value since May, have regained ground in the fourth quater as concerns about its mobile ad business and insider selling have eased. Shares have surged roughly 60 percent since November.

The company reported that net income in the fourth quarter is estimated about $64 million, or 3 cents a share, compared to $302 million, or 14 cents a share in the year-ago period.

As The Telegraph writes, Facebook has already warned Wall Street that its costs are expected to grow faster than sales this year.

The social network went on explaining that it battles for a larger slice of the mobile advertising market.

“We’re building profits for the long-term,” Facebook founder and chief executive Mark Zuckerberg told analysts on Wednesday night.

The news came soon after reports surfaced claiming that revenue from Google Inc’s core Internet business exceeded predictions during the holiday quarter with advertising rates falling less than in previous periods.

Excluding traffic-acquisition costs, the business generated net revenue of $9.83 billion, compared to $8.13 billion last year, the company reported on Tuesday. The numbers eclipsed a $9.6 billion average predictons from six analysts.

“Business looked really strong, especially from a profitability perspective. They really grew their margins in the core business,” said Sameet Sinha, an analyst with B. Riley Caris.

“Most of that strength seems to be coming from international markets which grew revenues quite substantially: up 23 percent year over year, versus the 15 percent growth in the third quarter.”

As Reuters writes, average cost-per-click, a critical metric that denotes the price advertisers pay Google, declined 6 percent from the previous year, “the fifth consecutive quarter of decline but an improvement over the third quarter’s 15 percent slide.”

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