Facebook Inc. said Wednesday that revenue surged 61 percent in the second quarter, fueled by mobile advertising, sending the company's stock up in extended trading past its all-time closing high.
Facebook's sales rose to $2.91 billion for the period from $1.81 billion a year earlier, topping the average analyst estimate of $2.81 billion, according to data compiled by Bloomberg. Promotions on wireless devices accounted for 62 percent of advertising sales, meeting analysts' estimates, the company said. That was up from 59 percent in the previous period and from almost nothing at the time of the company's 2012 initial public offering.
The results underlined how Facebook, which faced investor scrutiny for lacking mobile revenue when it went public, has quashed those concerns. With ads on smartphones and tablets now its core moneymaker, the Menlo Park, Calif.-based social network has worked to improve the quality of the promotions, added options for video and also debuted applications that can take advantage of audiences on mobile gadgets.
"Facebook just has a better advertising offering now," said Shyam Patil, an analyst at Wedbush Securities who has the equivalent of a buy rating on the stock. "It's a higher return on investment for the advertiser and so they're able to pay more money, increasing Facebook's revenue, and much of that is on mobile."
The stock rose in extended trading to as high as $74.77, after gaining 2.9 percent to $71.29 at the close in New York. That was above Facebook's closing record of $72.03 in March. Shares are up 30 percent this year, compared with a 7.5 percent increase in the Standard & Poor's 500 index.
Net income rose to $791 million, or 30 cents a share, from $333 million, or 13 cents, a year earlier, Facebook said. Profit excluding some items was 42 cents a share, exceeding the average analyst estimate of 32 cents.
Facebook's costs and expenses in the quarter increased 22 percent to $1.52 billion.
"Our tools and the products we're building are working," Chief Operating Officer Sheryl Sandberg said in an interview. "They're working to drive engagement, they're working to drive sales."
Facebook's revenue increase shows a similar strength to other Web companies that are also benefiting from the rise of digital advertising. Last week, Google Inc. posted sales that exceeded analysts' estimates, largely based on the strength of online advertising. Facebook and Google are taking share from other Internet companies such as Yahoo Inc., which last week reported a decline in quarterly sales and missed analysts' projections.
Facebook accounted for 5.8 percent of worldwide digital ad revenue in 2013, up from 4.1 percent in 2012, according to EMarketer Inc. Digital ad spending worldwide rose 14.8 percent to $120 billion last year and is projected to reach $140 billion this year.
To capitalize on these trends, Facebook has been adding to its arsenal of advertising services. Apart from rolling out a video-ad product to compete for television budgets and a network for distributing ads on other developers' applications, Facebook this month agreed to acquire LiveRail, a startup that would help serve video promotions on the Web beyond the social network.
Chief Executive Officer Mark Zuckerberg has also been making multibillion-dollar acquisitions to diversify the company. Facebook in February announced it would pay about $19 billion for WhatsApp Inc., a messaging app with more than half a billion users. This week, the company closed the acquisition of Oculus VR Inc., which makes a virtual-reality headset that Zuckerberg has said will be a major communication device after mobile phones.
Facebook now has 1.32 billion monthly active users, up from 1.28 billion in the previous quarter. The company's international strategy includes using drones to deliver the Internet to remote areas and tailoring ads to individual markets.
Business on 07/24/2014