Facebook reported a 60 percent jump in third-quarter revenue Wednesday, driven by the social network’s growing success in capturing a mobile audience.
The number of active monthly Facebook users climbed 18 percent overall during the quarter but spiked 45 percent on mobile devices. Advertising profits jumped 66 percent year over year, with 49 percent of that revenue coming from mobile.
Since its initial public offering last year, the firm has faced lingering Wall Street skepticism that it will develop a profitable advertising strategy. The results reported Wednesday, which beat analysts’ expectations, could help address those concerns.
“The strong results we achieved this quarter show that we’re prepared for the next phase of our company,” Facebook chief executive Mark Zuckerberg said in a statement.
Ahead of the earnings report, Facebook’s shares closed Wednesday’s regular trading down slightly at about $49 a share.
In the past year, the company has rolled out major changes to where and how it displays ads, an overhaul aimed at cheering marketers unhappy with mixed Facebook returns.
“This comes down to proving advertising value to marketers,” said Nate Elliott, principal analyst at Forrester Research. “Facebook’s baseline concern is always keeping users engaged, and they’re good at that.… But at the end of the day, the question I’m asking is how they’re going to achieve parity with the rest of the online market.”
According to Forrester’s research, businesses in the United States, Canada and Britain are less satisfied with Facebook ads than with any other type of marketing, including through such Facebook competitors as Google, LinkedIn and Twitter. A report by Adobe Digital Index based on 131 billion Facebook ad impressions found that marketing referrals from Facebook fell 20 percent in 2013 while referrals from Pinterest and Twitter jumped substantially.
That is worrisome, analysts say, because more than 88 percent of Facebook’s revenue in the second quarter came from advertising. That number inched slightly higher, to 89 percent, this quarter.
Facebook has responded with new advertising tools, including FBX, a real-time exchange that displays ads based on users’ browsing behavior. The company also recently renovated its “mobile app ads,” which encourage users to download and use advertisers’ apps from their news feed.
And last week Facebook previewed how its long-anticipated ads will look on Instagram, which it bought in April, and promised a wider rollout to the photo-sharing app’s 150 million active users soon. Several major companies, including General Electric and PayPal, have signed on for the pilot, which – according to the Pew Research Center’s latest report on Instagram usage – will reach 18 percent of U.S. cellphone owners.
Those moves have pleased investors and analysts, who rank app download activity, Instagram monetization and video advertising among the company’s “key growth initiatives,” Merrill Lynch analyst Justin Post wrote in a research report.