Facebook trounces Wall Street estimates as ad sales growth soars
World’s most popular website turns in sterling quarter
The world’s most popular website and phone app provided more evidence on Wednesday that it is getting better at turning eyeballs into profits as Facebook trounced Wall Street’s estimates, sending its shares to an all-time high.
The leading social media company’s mobile app and push into video attracted new advertisers and encouraged existing ones to spend more. It now has more than 1.7 billion monthly users, well ahead of any rival.
Its shares were up 5.8 per cent in after-hours trading in New York at $130.45, after hitting their highest since the company went public in 2012.
“Facebook has shown that you can be a giant and you can be innovative,” said analyst Patrick Moorhead of Moor Insights & Strategy. “What is working very well is their very quick shift from desktop to mobility. This was their biggest issue when they went public.”
Facebook appears to be making much better inroads into video than social media rival Twitter, which reported its slowest quarterly revenue growth in three years on Wednesday.
Mobile advertising revenue accounted for 84 per cent of the company’s total advertising revenue, compared with 76 per cent a year earlier.
Total advertising revenue surged 63 per cent to US$6.24 billion, beating the average analyst estimate of $5.80 billion, according to market research firm FactSet StreetAccount.
The company also saw strong growth in monthly active users, now boasting 1.71 billion as of June 30, up from 1.49 billion a year earlier.
David Wehner, Facebook’s chief financial officer, pointed to Asia-Pacific, especially India, as one of the most promising areas for continued user growth.
Asia-Pacific “has been a consistently good performer for us over the last several quarters and we will continue to invest our global sales resources to drive opportunities there,” Wehner said in an interview with Reuters.
Facebook is one of the biggest beneficiaries as advertisers move money away from television to the internet and mobile platforms. The company has been beefing up its presence in the mobile video market, where Snapchat and YouTube pose strong competition.
The company is also courting advertisers to experiment with Facebook Live, its recently launched live video feature.
Facebook still has several untapped areas for revenue opportunities, including its WhatsApp and Messenger apps, both of which have more than 1 billion users. But Wehner said the company does not plan to monetize them any time soon, and that it is instead focused on building interactions between businesses and users on the apps.
Facebook also owns picture-sharing app Instagram, which recently announced it has more than 500 million users. Facebook has yet to say how much money Instagram makes, but research firm eMarketer predicts it will make $1.5 billion in revenue this year.
Excluding items, Facebook earned 97 cents per share for the second quarter ended June 30. Analysts on average had expected a profit of 82 cents per share, according to Thomson Reuters I/B/E/S.
Net income attributable to Facebook’s stockholders rose to $2.05 billion, or 71 cents per share, compared with $715 million, or 25 cents per share, a year earlier.
Total revenue rose 59.2 per cent to $6.44 billion, ahead of analysts’ average estimate of $6.02 billion.