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Mobile growth fuels social media giant's record revenue

Abu Mubarik

Shares of the world’s biggest social network surged 16 percent to a record $109.11.

File Photo
File Photo

Shares of the world’s biggest social network surged 16 percent to a record $109.11. The company gained about $40 billion in market value, more than three times the value of Twitter Inc. Facebook is the only major technology stock to advance this year, up about 4 percent so far.

The company now has 1.59 billion users who log into the service every month, especially on smartphones and tablets. That expansion in turn generates more profit, giving Mark Zuckerberg leeway to invest in the company’s future. On a call with investors Wednesday, the chief executive officer spent most of his time talking about virtual reality, artificial intelligence and connecting the rest of the world to the Internet. While those initiatives won’t contribute meaningfully for years, they’re aimed at making sure that more people put Facebook at the center of their digital lives.

“Our strategy is working and we have many more opportunities ahead,” Zuckerberg said. “So we’re going to continue investing to deliver more great results, over the long-term.”

Marketers are flocking to Facebook because of its knack for getting well-targeted ads in front of consumers. The same technology is now being deployed across Instagram, which just marked its first full quarter of ad sales across international markets. Chief Operating Officer Sheryl Sandberg said 98 of Facebook’s 100 top advertisers are also running campaigns on Instagram.

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Fourth-quarter sales rose to $5.84 billion, exceeding the $5.37 billion average analyst projection, according to data compiled by Bloomberg. About 80 percent of that came from mobile devices.

Ad Load

Not only is Facebook adding users and advertisers, it’s also putting more marketing messages in front of people. While the social network has been careful about overloading news feeds, it was able to boost the percentage, or ad load, in the latest quarter. Facebook said it would stick with this strategy, by making sure that ads are targeted, specific and relevant, blending in with what people would see in their feeds anyway.

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“If you’re an advertiser and you want to reach mass scale, you only have two options: Facebook and Google,” said James Cakmak, an analyst at Monness Crespi Hardt & Co. “Facebook remains the fastest-growing platform for advertiser spending, and as they open up new channels for users, that won’t change.”

Fourth-quarter net income more than doubled to $1.56 billion, or 54 cents a share, from 701 million, or 25 cents, a year earlier. Profit excluding some items was 79 cents a share, beating analysts’ average prediction for 68 cents.

The company said 500 million people watch 100 million hours of video on Facebook every day -- a trend that will be boosted as Facebook develops products for tracking live events on its application.

Ambitious Projects

For Facebook, the profit from ad sales enables investments in ambitious projects, which are starting to show early signs of progress. Oculus Rift, the virtual reality headset, started its first sales to consumers earlier this month, and the company said there are more than 100 games and experiences coming to the platform later this year. Internet.org, the free Web access initiative for emerging markets, has a Free Basics app now used by 19 million people, and it’s big enough to have sparked protests in India for being too Facebook-centric.

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Facebook has also been pushing to get more revenue from international markets -- especially in Asia, where executives spent more time in recent months, and where Instagram now advertises. Revenue from Asia jumped 19 percent from the prior quarter to $846 million, accelerating from an increase of 14 percent in the third quarter.

Apart from users of its main social network, Facebook now has several properties that are poised to top 1 billion users, including WhatsApp and Messenger.

“With many levers of growth yet to be pulled, we continue to see many reasons to remain highly optimistic in Facebook,” Brian Wieser, an analyst at Pivotal Research Group, wrote in a note to investors.

Credit: Bloomberg.com

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Abu Mubarik Abu Mubarik Abu Mubarik is a writer at Pulse Ghana with special interests in Ghana politics, international relations and geopolitics.

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