Facebook Beats Expectations on Strong Mobile Growth

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Facebook, the world's largest social networking site, reported strong second-quarter revenue and profit on Wednesday, blowing past Wall Street's expecations and sending the stock up about 20 percent in after-hours trading.

The company said it had net income of $333 milion, or 13 cents a share. Excluding stock-based compensation expenses, profits were $488 million or 19 cents a share, compared to 12 cents a share in the second quarter a year ago. Revenue soared 53 percent to $1.8 billion.

"We've made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile," Mark Zuckerberg, Facebook's founder and chief executive officer, said in a statement. "The work we've done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future."

The company's results show that its users are continuing to shift toward mobile phones and tablets to access the site instead of a computer's Web browser. Although the company's total number of active monthly users worldwide grew slightly from the first quarter to 1.15 billion, the number of people who use its mobile versions at least once a month grew 9 percent to 819 million in that time.

Of total advertising revenue, 41 percent came from mobile, up from 30 percent in the first quarter.

Users' preference for accessing Facebook on the go has created unique revenue opportunities, such as ads that prompt users to install mobile apps like games. But advertisers are generally willing to pay much less for a mobile ad than they are for the desktop.

The company's sharp revenue growth reflects increased competition among advertisers to reach Facebook's large user base, said Rob Jewell, president of Spruce Media, a firm that helps advertisers like McDonald's and the insurer Progressive to buy ads on the social network and measure their effectiveness.

Facebook's ad rates are generally set through a bidding process, and Mr. Jewell said that his clients paid about 10 percent more on average for ads in the second quarter than in the first quarter. Ads in the news feed, both on the desktop and mobile versions of Facebook, were in particularly high demand, with rates up about 75 percent from the first quarter for both categories.

"Facebook is the best channel for mobile app advertisers to purchase advertising," Mr. Jewell said.

In the second quarter of 2012, the company reported a net loss of $743 million, or 8 cents a share. But that figure included $1.3 billion in compensation expenses related to the company's initial public offering. Excluding such one-time items, the company's profit a year ago was $295 million, or 12 cents a share, and its revenue was $1.2 billion.

Wall Street analysts were expecting the company to report earnings of 14 cents a share on revenues of $1.62 billion, according to a survey by Thomson Reuters.


This article originally appeared in The New York Times.


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