SAN FRANCISCO — Facebook’s chief executive, Mark Zuckerberg, told Wall Street on Tuesday that his company was on its way to cracking the mobile puzzle.
“I want to dispel this myth that Facebook can’t make money on mobile,” he told financial analysts on the company’s third-quarter earnings call. “We are just getting started.”
Even before he spoke, investors seemed to take comfort from the company’s earnings report, released on Tuesday after the market closed.
Facebook posted revenue that slightly beat forecasts, and it said 14 percent of its advertising revenue came from ads on mobile devices. With those results, its shares rallied more than 8 percent in after-hours trading. Even so, they were at about 45 percent of the initial public offering price.
“You see a bit of a relief rally,” said Colin Sebastian, an analyst with R.W. Baird. He added, however, that “Facebook still has a lot to prove in terms of their overall competitiveness and market share in online advertising.”
The rally came even though the company reported a net loss of $59 million in its third quarter, compared with net income of $227 million a year ago.
The earnings report was the first time the company had broken out from its overall advertising revenue how much money it collects from mobile ads. The information helped to address a critical question that investors have had about how Facebook will respond to the world’s shift to mobile computing; 60 percent of all Facebook users log in from their phones.
Although it is not a direct comparison, Google is poised to make far more money from mobile devices. Google said that in the coming year, it would earn $8 billion from mobile advertising, apps and content. Facebook this quarter earned $150 million from mobile ads.
Analysts say Facebook’s biggest promise lies in strategically using the data it keeps on its one billion users. For Facebook to increase its advertising revenue significantly, it has to use this data to sell ads beyond its mobile app and desktop platforms. It has to serve ads to Facebook users when they are surfing the Web or playing online games or, crucially, when they are using their smartphones and tablets.
Even though Facebook makes the bulk of its revenue through advertising, in the earnings call, Mr. Zuckerberg talked about the company’s plan to branch out and make money in other ways, including by enabling people to buy and sell things on the platform. For example, he pointed to a product that allows users to buy gifts for their Facebook friends on their birthdays.
The company, which has its headquarters in Menlo Park, Calif., reported that revenue in the quarter grew 32 percent, to $1.26 billion, slightly surpassing analysts’ forecasts.
Analysts had expected revenue to rise by 29 percent compared with a year earlier, to $1.23 billion, according to a survey by Bloomberg. That consensus had already accounted for slowing growth. Revenue grew by 32 percent year-over-year in the second quarter of 2012 and 45 percent in the first quarter; by contrast, the company’s revenue doubled in the third quarter of 2011.
Analysts had also expected 11 cents a share of net income, using the nonstandard accounting methods they prefer, but Facebook beat that estimate by a penny. The company said it had over one billion users and made an average of $1.29 on each. Those rates were considerably higher in North America, where ad rates are relatively high. The company itself is growing fast. It employs 4,300 today, a 40 percent increase from a year ago.
Facebook made its public debut on May 18 with a valuation of over $100 billion, or more than 100 times its annual earnings at the time. At that price, it was more expensive than 99 percent of the companies in the Standard & Poor’s 500-stock index, Bloomberg calculated. Since then, Facebook remains among the costliest, certainly in the technology sector. Its price-to-earnings ratio is over 67 before the earnings numbers were released, compared with just over 20 for Google and just over 14 for Apple.
Facebook shares have hovered around $20 for several weeks, barely budging even when the company announced in early October that it had drawn a record one billion regular users.
“Wall Street cares about money,” is how Laura Martin, an analyst with Needham & Company, put it. “We need to see users turn into revenue.”
Facebook’s challenges remain formidable. It has to make more money from mobile advertising, a problem that many tech companies face.
Also, the vast majority of Facebook’s users are overseas, where ad rates can be far lower. And its share of revenues from payments has declined slightly, in part because of the poor performance on Wall Street of its social games partner, Zynga.
Not least, employees and other insiders will become eligible to sell off a tranche of shares in the coming months, potentially flooding the market with stock.
“They’re going to have to be pretty nimble,” said Aaron Kessler, an analyst with Raymond James. “But it’s a good first step.”
Even before he spoke, investors seemed to take comfort from the company’s earnings report, released on Tuesday after the market closed.
Facebook posted revenue that slightly beat forecasts, and it said 14 percent of its advertising revenue came from ads on mobile devices. With those results, its shares rallied more than 8 percent in after-hours trading. Even so, they were at about 45 percent of the initial public offering price.
“You see a bit of a relief rally,” said Colin Sebastian, an analyst with R.W. Baird. He added, however, that “Facebook still has a lot to prove in terms of their overall competitiveness and market share in online advertising.”
The rally came even though the company reported a net loss of $59 million in its third quarter, compared with net income of $227 million a year ago.
The earnings report was the first time the company had broken out from its overall advertising revenue how much money it collects from mobile ads. The information helped to address a critical question that investors have had about how Facebook will respond to the world’s shift to mobile computing; 60 percent of all Facebook users log in from their phones.
Although it is not a direct comparison, Google is poised to make far more money from mobile devices. Google said that in the coming year, it would earn $8 billion from mobile advertising, apps and content. Facebook this quarter earned $150 million from mobile ads.
Analysts say Facebook’s biggest promise lies in strategically using the data it keeps on its one billion users. For Facebook to increase its advertising revenue significantly, it has to use this data to sell ads beyond its mobile app and desktop platforms. It has to serve ads to Facebook users when they are surfing the Web or playing online games or, crucially, when they are using their smartphones and tablets.
Even though Facebook makes the bulk of its revenue through advertising, in the earnings call, Mr. Zuckerberg talked about the company’s plan to branch out and make money in other ways, including by enabling people to buy and sell things on the platform. For example, he pointed to a product that allows users to buy gifts for their Facebook friends on their birthdays.
The company, which has its headquarters in Menlo Park, Calif., reported that revenue in the quarter grew 32 percent, to $1.26 billion, slightly surpassing analysts’ forecasts.
Analysts had expected revenue to rise by 29 percent compared with a year earlier, to $1.23 billion, according to a survey by Bloomberg. That consensus had already accounted for slowing growth. Revenue grew by 32 percent year-over-year in the second quarter of 2012 and 45 percent in the first quarter; by contrast, the company’s revenue doubled in the third quarter of 2011.
Analysts had also expected 11 cents a share of net income, using the nonstandard accounting methods they prefer, but Facebook beat that estimate by a penny. The company said it had over one billion users and made an average of $1.29 on each. Those rates were considerably higher in North America, where ad rates are relatively high. The company itself is growing fast. It employs 4,300 today, a 40 percent increase from a year ago.
Facebook made its public debut on May 18 with a valuation of over $100 billion, or more than 100 times its annual earnings at the time. At that price, it was more expensive than 99 percent of the companies in the Standard & Poor’s 500-stock index, Bloomberg calculated. Since then, Facebook remains among the costliest, certainly in the technology sector. Its price-to-earnings ratio is over 67 before the earnings numbers were released, compared with just over 20 for Google and just over 14 for Apple.
Facebook shares have hovered around $20 for several weeks, barely budging even when the company announced in early October that it had drawn a record one billion regular users.
“Wall Street cares about money,” is how Laura Martin, an analyst with Needham & Company, put it. “We need to see users turn into revenue.”
Facebook’s challenges remain formidable. It has to make more money from mobile advertising, a problem that many tech companies face.
Also, the vast majority of Facebook’s users are overseas, where ad rates can be far lower. And its share of revenues from payments has declined slightly, in part because of the poor performance on Wall Street of its social games partner, Zynga.
Not least, employees and other insiders will become eligible to sell off a tranche of shares in the coming months, potentially flooding the market with stock.
“They’re going to have to be pretty nimble,” said Aaron Kessler, an analyst with Raymond James. “But it’s a good first step.”
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