Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg’s decision last year to bet big on mobile software is paying off, with sales of ads on wireless devices now on track to surpass revenue from desktop computers.
Surging demand for mobile advertising helped profit and revenue top analysts’ estimates in the second quarter yesterday. The results sent shares of the world’s most popular social-networking service up as much as 20 percent in early trading today, leaving them poised for a record one-day gain.
A Facebook Inc. employee holds a phone that is running the new Home program during an event at the company's headquarters in Menlo Park, California, U.S., on Thursday, April 4, 2013. Photographer: David Paul Morris/Bloomberg
July 24 (Bloomberg) -- Rob Jewell, founder and chief executive officer of Spruce Media, and David Kirkpatrick, CEO of Techonomy Media and author of "The Facebook Effect," talk about Facebook Inc.'s second-quarter earnings and outlook. Facebook reported sales and profit that exceeded estimates as it lured more advertisers to its mobile services. Jewell and Kirkpatrick speak with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)
A pedestrian walks past the Facebook Inc. 'like' logo displayed on a sign at the entrance to Facebook headquarters in Menlo Park, California. Photographer: David Paul Morris/Bloomberg
The earnings may finally quiet concerns, voiced by analysts and investors since Facebook’s May 2012 initial public offering, that the rising popularity of smartphones and tablets is outpacing its ability to make money selling promotions to mobile users. By letting marketers show messages in the news feed on such devices, and shifting development efforts toward applications, Zuckerberg is delivering on his promise of making Facebook a “mobile-first” company, according toJordan Rohan, an analyst at Stifel Nicolaus & Co. in New York.
“There’s latent demand for marketers to spend money on Facebook,” Rohan, who rates the shares a buy, said in an interview. “The company finally introduced the right set of ad products to facilitate that.”
Revenue rose 53 percent to $1.81 billion in the latest quarter, the company said in a statement yesterday. Profit excluding certain items was 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.
Blowout Quarter
Facebook jumped to $31.70 at 7:13 a.m. New York time before tha markets opened, signaling the $64 billion company may exceed its record one-day gain of 19 percent in October, according to data compiled by Bloomberg.
“Finally, the blowout quarter that Facebook bulls have been waiting for,” said Paul Sweeney, an analyst at Bloomberg Industries. “Among many impressive data points, I think investors will focus on the percentage of revenue from mobile of 41 percent, which was well above consensus.”
Facebook, which had priced its IPO at $38 a share, saw its stock slump as low as $17.55 in September. Even after today’s gain, the stock is 17 percent below its initial offering price. Concern about Facebook’s ability to shift to mobile has weighed on the company’s shares since its $16 billion IPO, the largest technology offering on record.
Even with the decline, the Menlo Park, California-based company traded at 115 times earnings as of yesterday’s close, more expensive than 98 percent of the companies in the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.
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