Mark Zuckerberg

Facebook's mobile ad growth leads to a $2 billion quarter

A week shy of its 10th birthday, Facebook announced that it made nearly $2.6 billion in the last quarter of the year. The social network’s attempt at becoming a full-fledged advertising operation is becoming reality—ads pulled in $2.34 billion of that cash last quarter. Facebook in its first decade managed to go from a platform for college kids to check each other out to a billion-dollar media behemoth.

Facebook has long been in the ad game, but in 2013 the company really shifted its focus to mobile ads. It was a lucrative decision—mobile ads accounted for more than half of Facebook’s revenue last quarter, and it was the first time the company saw more than $1 billion in mobile ad revenue. Facebook COO Sheryl Sandberg said during the company’s Wednesday earnings call that Black Friday was the company’s single biggest mobile ad revenue driver last quarter.

Analysts who are paid to know these things expected Facebook to pull in $2.33 billion, so Mark Zuckerberg is probably feeling really good right now. On top of billions in revenue, which is nothing to sneeze at, Facebook also reported a profit of $523 million, up from $64 million from the same period in 2012.

More eyeballs on better products

Facebook may be struggling to keep teens’ focus, but that doesn’t mean the network is losing users. (Facebook had no new updates on teen usage in its latest report.) To the contrary: The network is adding eyeballs, especially on smartphones, where a good chunk of that ad money comes from. Facebook now has 1.23 billion monthly active users, but more impressively, almost a billion (945 million) of those users are checking their News Feeds on mobile. Mobile daily actives are up 49 percent, to 556 million.

Facebook is building momentum and shows no signs of slowing, despite reports of its imminent demise. Each quarter has returned better and higher numbers than the one before.

Mobile Facebook Messenger

Facebook plans to release more stand-alone apps like Messenger this year.

Zuckerberg attributed the company’s success to Facebook’s constant improvement of its “core experiences.” The network updated Facebook Messenger late last year and saw more than 70 percent growth in the last three months. Zuck also pointed to Instagram and Facebook Groups as pivotal products—more than 500 million people use Groups every month. He didn’t mention Facebook Home, so we’ll throw that one on the discard pile, where it joins Poke.

Facebook’s strategy going forward is stand-alone experiences, Zuckerberg said. Apps like Messenger and Instagram, and services that can grow on their own outside of Facebook will be key this year. (Perhaps the rumored Paper newsreading app will finally come to fruition.) More separate apps also mean more users, ones who might not be that into the core Facebook experience but like to send photos or messages. Any growth in users means more opportunities to show ads.

Instagram ads from brands like Michael Kors are still in their early stages.

In the fourth quarter, Facebook kicked up the volume of News Feed ads, particularly on mobile, but saw stable click-through rates and improved user sentiment. Zuckerberg said Facebook surveys 35,000 people a day to make sure ads aren’t making users angry.

Ads on Instagram are still in the “very early” stages—again, to make sure that it doesn’t ruin the user experience.

Facebook is targeting app developers and small businesses as potential advertisers. Mobile app-install ads have done well for the company, and Sandberg said Facebook is targeting small businesses by helping them build pages and attract fans, which will lead to ad buys. Sandberg hopes local biz will realize that Facebook’s hyper-targeting ad capabilities can help them reach the likeliest customers.

This will be the year that Facebook rolls out additional stand-alone apps, continues its public content push, and delivers Graph Search to smartphones, Zuckerberg said. Oh, and continue to make a lot of money from ads. Zuckerberg might also somehow find time to accomplish his goal of connecting the whole world to the Internet, but that seems a little ambitious.

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