Mobile carries Facebook to record earnings
29 January 2016 | 0
Facebook’s efforts to figure out how users want to connect when they’re on the move is paying off.According to the social network’s latest earnings report released Wednesday, mobile is carrying the company, pushing it to record fourth-quarter results.
Investors were pleased, and the stock price surged 15.5%, closing Thursday at $109.11 a share.
It’s an impressive pivot for Facebook, which a few years ago struggled to figure out its mobile strategy and listed it as its biggest challenge. In 2012, when Facebook co-founder and CEO Mark Zuckerberg was trying to sell potential investors on his company prior to its IPO, he had to admit they hadn’t figured out a way to monetise mobile. In an amended filing with the US Securities and Exchange Commission, the company even said mobility was one of Facebook’s biggest risk factors.
Fast forward three-and-a-half years and Facebook has not only figured out mobile, its mobile ad revenue accounted for 80% of its fourth-quarter total ad revenue compared with 69% in the same time period a year earlier.
Facebook also reported that overall sales in the fourth quarter jumped 52% year-on-year to $5.84 billion. Profit also increased, going from $701 million a year ago to $1.56 billion in the last quarter.
The company’s financial results outpaced Wall Street’s expectations of $5.37 billion in revenue and $1.2 billion in profit, for the fourth quarter.
Part of what makes Facebook’s efforts stand out is that the company manages to update its app without ticking off its users. That’s not easy when designers have so little real estate to work with, and users are demanding more functionality.”They are generating revenue without [angering] users,” said Rob Enderle, an analyst with the Enderle Group. “This is very difficult on small screens. And Facebook, in an impressively short period of time, has gone from clueless on mobile to what is likely the best example of how to do this right, based on their financial results.”
Company executives also need to keep an eye on Google, Enderle said.
“Right now [Facebook is] likely scaring the heck out of Google. They need to anticipate a Google response and consolidate their control over advertisers so Google can’t make a competitive move and take back the value Facebook has fought so hard to create.”
Sharon Gaudin, IDG News Service