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Monday, 22 December 2014

Social mobility

Facebook answers questions rivals can't

Facebook is answering questions that its rivals can’t. Big technology firms have mostly reported subpar second-quarter earnings, with desktop software giant Microsoft the leading victim of the shift to mobile computing. By contrast, Mark Zuckerberg’s social network is thriving on portable gadgets, and Facebook’s revenue growth – 53 percent to $1.8 billion in the quarter – was the fastest since its initial public offering in May last year. There’s more fuel here.

The number of people going to Facebook via mobile devices continues its inexorable rise. Of the 1.15 billion people who visit the site monthly, more than 800 million now do so via smartphones and tablets. More importantly, Facebook has figured out how to sell advertising on those smaller screens. Mobile now accounts for more than 41 percent of all advertising revenue, up from about 30 percent last quarter and close to nothing a year ago.

Not only is Facebook serving up lots of mobile ads, it is getting more revenue out of each one. According to the company, the price per click on a mobile ad rose in the quarter and overall ad prices rose 13 percent year-on-year. That’s notable when Internet search giant Google is seeing its revenue per click decline as cheaper mobile ads displace more expensive desktop ads – and helps explain why Facebook’s shares jumped as much as 20 percent in after-hours trading on Wednesday. Another similar leap, and the company’s stock would finally regain its $38-a-share IPO price.

The mobile advertising engine is revving up, too. Users are spending a lot of their time on mobile devices, but as yet only about 2 percent of global ad spending is aimed at smartphones and tablets, Facebook reckons. It seems nearly inevitable that advertisers will eventually spend more money and time reaching people on their handheld gadgets. At one stage there were questions about Facebook’s ability to capitalize on that trend. Now it looks like one of the few tech firms that has figured out how to do just that.

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Facebook on July 24 reported revenue of $1.8 billion for the second quarter, an increase of 53 percent from the same period last year. The social network’s net income was $333 million in the quarter, or 13 cents per share. Facebook lost $157 million in the same quarter last year, largely because of share-based compensation costs related to its initial public offering.

The company’s mobile advertising revenue accounted for 41 percent of all ad sales in the second quarter, up from 30 percent in the first quarter and 14 percent six months earlier in the third quarter of 2012.

The social network had 1.16 billion monthly active users in the quarter, an increase of 21 percent over the prior year. Monthly mobile users rose 51 percent to 819 million.

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