Facebook proves it can make money on mobile

Social network heartens Wall Street investors who find positive third quarter news after sluggish IPO

By , Computerworld |  IT Management, Facebook, Social Networking

Facebook has shown Wall Street that it's finally starting to figure out how to make money from its vast array of mobile users.

It's third quarter financial report, which showed a significant increase in mobile users and mobile revenue, proved heartening to the financial analysts and investors who have long criticized the social networking vendor for lacking a mobile strategy.

"Facebook had to prove that it could profit from mobile," said Ezra Gottheil, an analyst with Technology Business Research. "Now they've proven they can. If it can profit some, it can profit more. Once they've found a way, the upside is almost inevitable."

The third quarter financials released Tuesday showed that mobile ad sales of about $150 million accounted for 14% of Facebook's overall revenue of $1.26 billion. The overall revenue was up by 32% and exceeded analysts expectations.

The company reported a loss of $59 million, which did not deter investors.

Just before Facebook's earnings call after the close of trading on Tuesday, the company's stock was at $19.50 a share, not quite half of the opening IPO price of $38. At 1:20 ET on Thursday, the share price was at $22.74.

The investor reaction was good news for a company that has taken a very public beating since its lackluster initial public offering last May.

The earnings report noted that the number of Facebook monthly active mobile users hit 604 million in the third quarter, up 61% from the year-earlier period.

Facebook also noted in the report that it has closed its purchase of Instagram, a popular photo-sharing app, has redesigned its iOS app and has delivered new development tools for iOS and Android.

"They've yet to really crack the nut and capitalize on the big opportunity inside the mobile space, but this shows they have made some progress," said Brad Shimmin, an analyst with Current Analysis.

"It's up to Mark Zuckerberg to show the board that they are making slow and steady progress. That would be better than shooting in the dark and missing," Shimmin said.

Shimmin said that it will be considered a success if Facebook can continue to gradually increase revenue generated from its growing mobile base,


Originally published on Computerworld |  Click here to read the original story.
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