Shares of Facebook shot up 16.75 percent in after hours trading on Wednesday after the world’s largest social networking website posted strong second quarter results that easily beat Wall Street estimates as the company profited from a boost in mobile revenue with advertisers who seek to access Facebook’s over 1 billion users and utilize the wealth of data related to their users’ likes.
Last September when shares of Facebook plummeted to the mid 17’s from their peak of 38 on May 18,2012 during the company’s initial public offering (IPO), concerns were mounting about Facebook being unable to monetize a massive social networking site that was centered more on relationship building with old friends and acquaintances than making money for investors.
CEO Mark Zuckerberg believed that he could grow Facebook’s revenues by making a stronger push into mobile advertising instead of focusing too heavily on desktop advertising.
Zuckerberg’s big bet paid off.
During yesterday’s earnings report, Zuckerberg announced that Facebook’s mobile ad revenue for the second quarter accounted for 41 percent of Facebook’s $1.6 billion advertising revenue, up 61 percent from the same quarter last year.
Facebook’s mobile users grew 51 percent to 819 million.
The type of mobile ads Facebook has embedded into their daily news feeds is called “native advertising”, a fast growing segment of advertising that involves an advertiser seeking the attention of Facebook users by sending targeted ads through the flowing content stream of news and information that is available on the website.
“Mobile ads, which made up 30 percent of revenue in the first quarter, will soon account for more than half of advertising dollars”, Zuckerberg admitted in Wednesday’s conference call.
“When it comes to mobile, I’m very pleased with the results. We now have more daily actives on mobile than on desktop. Nearly half a billion people use Facebook on their phones everyday and soon we’ll have more revenue on mobile than on desktop as well. This progress is the result of investments we started making more than a year ago and in some cases years ago” Zuckerberg explained in the conference call.
Facebook posted revenue growth of 53 percent to $1.813 billion in the second quarter, beating average estimates of $1.62 billion.
Zuckerberg dismissed reports that were circulated in some media outlets, claiming that younger people have been fleeing Facebook in favor of other social media sites.
The total number of Facebook members for the quarter was 1.15 billion versus 1.11 billion in the same quarter a year ago.
Facebook announced that approximately 61 percent of its 1.15 billion users now visit the service on a daily basis, compared to 58 percent in the same quarter a year ago.