Facebook Shows Mobile Strength With These Two Charts
Facebook’s (NASDAQ:FB) timeline since going public has many blemishes on it. Between its initial debut on the Nasdaq and well publicized insider selling, the social media giant has experienced enough obstacles to last a lifetime. One of the biggest concerns about Facebook has included its monetization game-plan for the high growing mobile industry. However, the company managed to impress Wall Street with its latest financial results and signs of strength in mobile.
After Tuesday’s closing bell, Facebook released earnings for only the second time since going public in May. The company posted a net loss of $59 million for the third quarter, compared to a net gain of $227 million a year earlier. Excluding items, Facebook earned $311 million (12 cents per share), edging pass the average analyst estimate by one red cent. Facebook shares initially sold-off after the results, but quickly recovered once the details were digested a bit more.
Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.
While Facebook’s bottom line was good enough to avoid heavy scrutiny and poking, the real focus was on users and the shift into mobile. As of the end of September, Facebook attracted 1.01 billion monthly active users, representing an increase of 26 percent year-over-year. More importantly, mobile monthly active users surged 61 percent to 604 million in the same time period.
As the chart above shows, Facebook has a strong upward trend when it comes to gaining mobile monthly active users. Over the past two years, the number of users have more than tripled. This bodes well for the future, because mobile users have a 70 percent likelihood of using Facebook on a daily basis, compared to only 40 percent on desktops, according to chief executive officer Mark Zuckerberg.
“As proud as I am that a billion people use Facebook each month, I’m also really happy that over 600 million people now share and connect on Facebook every month using mobile devices,” explains Zuckerberg. “People who use our mobile products are more engaged, and we believe we can increase engagement even further as we continue to introduce new products and improve our platform. At the same time, we are deeply integrating monetization into our product teams in order to build a stronger, more valuable company.”
Facebook has recently made improvements in its mobile offerings to keep users coming back for more. It completely rebuilt Facebook for Apple’s (NASDAQ:AAPL) iOS in order to improve speed and reliability. Facebook also updated Messenger for Android and iOS, and made Facebook Camera available in 18 languages. The social media network is even integrated in the recently released iOS 6, which is running on more than 200 million devices.
Even though the recent changes with Facebook and mobile have been impressive, it is all about the bucks. Fortunately, the company impressed on its top-line. Unlike other tech names such as Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG) and IBM (NYSE:IBM), Facebook managed to beat expectations on revenue. Total sales totaled $1.26 billion for the third quarter, an increase of 32 percent from $954 million a year earlier. On average, Wall Street expected sales to come in around $1.23 billion. Excluding the impact of year-over-year changes in foreign exchange rates, revenue would have increased by 38 percent.
Shareholders especially cheered the boost in revenue by mobile. Total revenue from advertising was $1.09 billion, representing 86 percent of overall sales, logging a 36 percent increase from the same quarter last year. Of the total revenue from advertising, 14 percent was generated from mobile.
As the chart above shows, Facebook has now reported back-to-back quarters of revenue growth, after seeing a decline in revenue in the first quarter of 2012.
On the conference call, Sheryl Sandberg explains, “In Q3, we saw marketers embrace News Feed on both mobile and desktop as a growing part of their advertising strategies. This is driving results, given that page post ads in News Feed on both mobile and desktop are more than eight times as engaging as page post ads on the right-hand side. Advertisers are also seeing a 10x greater ad recall per impression. We see significant opportunity for future revenue growth from products and mobile News Feed, such as paid search ads and Mobile App-Install Ads, which we launched just last week.”
She adds, “We only started our mobile monetization efforts in March, and already in the third quarter, 14 percent of our advertising revenue came from mobile. Many of the products I’ve highlighted in this are early in their history and will take time to generate revenue and scale, but our results to date suggest that we’re on the right track.”
Although Facebook still carries a sky-high price-to-earnings multiple and has plenty of work left to do with mobile, shares surged more than 20 percent higher in Wednesday morning trading.
Investor Insight: Did Zynga Use Apple Event to Fire Employees Under the Radar?