Facebook beats expectations on strong mobile ad growth

Beijing, July 26 – The social networking company Facebook said Wednesday that it had revved up its mobile advertising from virtually nothing a year ago to 41 percent of its total ad revenue of 1.6 billion dollars in the second quarter.

“Soon we’ll have more revenue on mobile than desktop,” Mark Zuckerberg, Facebook’s founder and chief executive, said in a conference call with analysts as quoted by media reports.

Facebook’s results elated investors, who sent the company’s stock up nearly 17 percent, to 30.94 dollars, in after-hours trading.

Analysts said the strong performance dissipated lingering worries that the company could not adapt to the current Internet environment, in which users are relying more on mobile devices instead of personal computers to access the information they want.

Those concerns have dogged the company since its disappointing initial public offering in May 2012, in which it sold shares at 38 dollar and then saw them fall by half.

“One of the biggest overhangs from their I.P.O. is that this company had been blindsided by mobile,” said Mark Mahaney, an analyst with RBC Capital Markets. “They caught up. Instead of being behind the curve on mobile, they are ahead of the curve.”

One concern for the future is whether Facebook will annoy its users if it significantly increases the number of ads in news feeds, said Debra Aho Williamson, an analyst with eMarketer, a research firm.

Zuckerberg said Facebook’s studies have shown that users are noticing ads more, though the company is working to improve the quality and relevance of ads.

Facebook is also studying when and how to introduce video ads, which are expected to command at least several hundred thousand dollars each.

The company’s results also show how its users are continuing to shift toward mobile phones and tablets to use the site instead of a computer’s Web browser. Although the company’s total number of active monthly users worldwide grew slightly from the first quarter, to 1.15 billion, the number of people who use its mobile versions at least once a month grew 9 percent, to 819 million in that time.

Total ad revenue, a crucial measure watched by Wall Street, was 1.6 billion dollars, up 61 percent from the second quarter of 2012. Of total ad revenue, 41 percent came from mobile, up from 30 percent in the first quarter.

Users’ preference for reading Facebook on the go has created special revenue opportunities, like ads that prompt users to install mobile apps like games. But advertisers are generally willing to pay much less for a mobile ad than they are for the desktop.

The company’s sharp revenue growth reflects increased competition among advertisers to reach Facebook’s large user base, said Rob Jewell, chief executive of Spruce Media, a firm that helps advertisers to buy ads on the social network and measure their effectiveness.

Facebook’s ad rates are generally set through a bidding process, and Jewell said that his clients paid about 10 percent more on average for ads in the second quarter than in the first quarter.

“Facebook is the best channel for mobile app advertisers to purchase advertising,” Jewell said.

Facebook’s surprisingly strong second-quarter earnings contrasted with those of Google, which last week reported disappointing profits in mobile advertising.

While the two companies are not strictly comparable because Facebook is expanding its ads from a much a smaller base, Ronald Josey, an analyst at JMP Securities, said Facebook was doing extremely well in mobile categories like ads prompting users to install new mobile applications.

“This company is becoming more and more of a mobile company,” he said.

Agencies