The world's largest social network, Facebook, earned almost a third of all its advertising revenue from mobile users in the first quarter of the year, adding $374 million to its top line from an offering that did not exist 18 months ago.
Previously, analysts had pegged Facebook's mobile-driven revenue as a concern, as more users moved to mobile, while the social network lacked a plan to make money from the shift.
Despite the current standout results from its mobile offering, the group's shares are still trading below its listing level.
Facebook, which listed on Nasdaq last May, saw its share price come under increasing pressure over concerns that its revenue growth is stagnating. When the group listed, its shares were offered at $38, putting its value at more than $100 billion, while it is currently worth $47.9 billion.
Bigger than Africa?
According to the presentation, 665 million people use Facebook daily, compared with 618 million a quarter ago, while 1.1 billion people - just more than Africa's population in 2011 - visit the site monthly, compared with a billion in the three months to December.
Mobile monthly active users have grown from 288 million in the first quarter of 2011, to 751 million in the first quarter of this year, a 70 million quarter-on-quarter gain. Those who use the network only via mobile phones now account for 189 million users, up from 157 million a year ago.
Quarter-on-quarter, revenue declined slightly, dropping from $1.585 billion to $1.458 billion, translating into $1.35 from per user. Compared with the first quarter of last year, revenue gained from $1.06 billion.
Revenue from advertising was $1.25 billion, some 85% of total revenue and a 43% increase from the same quarter last year. Mobile advertising revenue accounted for about 30% of advertising revenue for the first three months of the year, up from about 23% a quarter ago.
In its filing before its debut, Facebook highlighted a potential concern for investors, stating it is yet to generate any meaningful income from its mobile services.
"If users continue to increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetisation strategies for our mobile users, our revenue and financial results may be negatively affected."
Targeting subscribers
"We've made a lot of progress in the first few months of the year," founder and CEO Mark Zuckerberg said in the results announcement. "We have seen strong growth and engagement across our community and launched several exciting products."
Recently, the network launched Facebook Home, which has had a lacklustre reception, and launched new advertising products such as Lookalike Audiences, Managed Custom Audiences, and Partner Categories, which help marketers improve their targeting capabilities on Facebook.
Facebook also continues to invest in its ad serving and measurement platforms, and has partnered with Datalogix, Epsilon, Acxiom, and BlueKai to enable marketers to incorporate off-Facebook purchasing data in order to deliver more relevant ads to users.
It also enhanced its ability to measure advertiser return-on-investment on digital media across the Internet through its acquisition of the Atlas Advertising Suite.
Not moved
Despite Facebook's progress in advertising, the stock closed at $27.43, a 0.339c or 1.22% decline, before recovering slightly to $27.52 in after-hours trade.
Vestact CEO Paul Theron says Facebook reported an "impressive" development with its mobile revenue growth. He notes that the group's big seller is co-promotion of other applications, from which it garners income.
Theron adds that the mobile revenue was not on the income statement 18 months ago. He says despite reports that the company's user base is dropping off, this was not acutely seen in the numbers.
Although growing its subscriber base and turning mobile into money, Theron says the challenge is to work out what the company's stock should be worth. "You're still buying a lot of blue sky."
Based on its current earnings, Theron says its price-to-earnings ratio is 83. Google, by comparison, is trading at 24.28, while Apple is at 10.49.
Theron notes that Goldman Sachs expects Facebook to double revenue by 2015, which augers well for the company's future prospects, but even if it pulls that off and gets earnings to 70c a share, it would still trade at 35.
Facebook is still fairly heavily valued and its current price is optimistic, says Theron. Vestact manages Facebook stock worth $163 000 on behalf of investors.
Share