Facebook revenue jumps 40 percent in Q4 as mobile overtakes Web use

The number of daily users on mobile exceeded daily Web users for the first time

Facebook posted a revenue increase of 40% in the fourth quarter as the number of daily mobile users exceeded daily Web users for the first time ever, the company reported.

Revenue for the social networking company rose to $1.59 billion in the quarter ended Dec. 31, up about 40% from $1.13 billion in the fourth quarter of 2011. The increase is a considerable uptick from the 32% year-over-year sales gain that Facebook posted in the third quarter of 2012.

The site's monthly active users on mobile devices increased 57% year over year to 680 million; mobile daily active users also exceeded daily active users on the Web for the first time during the quarter, Facebook announced.

Total monthly active users were 1.06 billion, up 25% from the year-earlier quarter.

"Today, there is no argument that Facebook is a mobile company," CEO Mark Zuckerberg said during a conference call with financial analysts.

Building new "mobile experiences" will be a focus in 2013, the company said, although executives on the call declined to offer details on any specific features the company would be rolling out. In December, Facebook launched its Poke messaging app for iOS and the Nearby business search tool for iOS and Android.

However, Facebook will not make a phone, Zuckerberg said. Instead it will continue to focus on enhancing the user experience across all types of devices. Even if the company were to sell 10 million phones, that would only represent 1% of users, "which makes no sense," Zuckerberg said.

Facebook's mobile business also brought in a larger share of the company's overall advertising revenue. It made up 23% of ad revenue, up from 14% of ad revenue in the third quarter.

Facebook's total advertising revenue was $1.33 billion, representing 84% of the company's total sales.

The mobile ad revenue gains are significant given that Facebook started 2012 without any mobile ads at all, executives said during the call. Advertisers can now place ads in users' news feeds on both the mobile and Web versions of the site.

At the same time, the news feed is becoming a more popular destination for ads. Sixty-five percent of advertisers are now placing ads in the news feed, compared with 50% at the end of the third quarter, Chief Operating Officer Sheryl Sandberg said. Ads in the news feed drive eight times as many sales as ads placed in the vertical "rail" area to the right of it, she said.

Moreover, the way that users are changing their behavior on Facebook -- such as with a larger variety of media and photographs, driven partly by the success of Instagram -- will make it easier for advertisers to blend into the news feed with multimedia ads, Zuckerberg said.

However, the company is still in the early stages of leveraging its mobile growth, executives said.

Facebook posted net income of $64 million for the quarter, representing a profit for the first time since the company went public last May. It reported a net loss of $59 million during 2012's third quarter. However, the fourth-quarter profit was down more than 78% from the $302 million that Facebook earned a year earlier, before it was publicly listed.

Total annual revenue increased 37% to $5.09 billion.

Copyright © 2013 IDG Communications, Inc.

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