San Francisco: The good news for investors: Facebook Inc is quickly figuring out how to make money from ads on mobile devices. The bad news: It hasn’t come cheap.
Advertising on mobile devices accounted for about 23 per cent, or $306 million (Dh1.12 billion), of ad revenue in the fourth quarter, the Menlo Park, California, company said on Wednesday. That was up from 14 per cent in the third quarter, the first time Facebook broke out mobile advertising.
“We started off the year with no ads on mobile, and we ended with 23 per cent of ad revenue coming from mobile in the fourth quarter,” Facebook Chief Executive Mark Zuckerberg told analysts during a conference call to discuss fourth-quarter financial results. “The numbers turned out even better than we thought.”
But the focus on mobile took a toll on margins. Fourth-quarter profit plunged 79 per cent to $64 million as the giant social network’s financial results were dragged down by higher costs.
Wedbush Securities analyst Michael Pachter said investors are worried that runaway expenses are outpacing revenue growth. The company’s costs, excluding employee stock compensation, soared 67 per cent to $849 million from a year earlier. “I see nothing bad in this report,” Pachter said. “If there is any one thing that may cause heartburn, it’s the level of spending.”
And that spending will continue in 2013. Zuckerberg said Facebook would not seek to “maximize profits” and would instead heavily invest in mobile and other businesses such as search.
Eight months after Facebook’s overhyped initial public stock offering fell flat, Facebook’s relationship with Wall Street is still complicated. There’s a stubborn sense on Wall Street that Facebook could be doing more to milk revenue from its users on mobile devices, analysts said.