- Profit tops estimates even as investments climb higher
- Daily average users exceeds 1 billion for first time
Facebook Inc. notched another quarter of revenue that beat estimates after stepping up its mobile-advertising efforts.
The company running the world’s biggest social network reported third-quarter sales of $4.5 billion, compared with the $4.37 billion average analyst estimate, according to data compiled by Bloomberg. There are now 1.01 billion daily visitors checking on other people and sharing status updates, the company said in a statement Wednesday. Monthly users jumped 14 percent to 1.55 billion.
Facebook isn’t just relying on more users -- it’s also putting more ads in front of this vast, growing audience. The company brought its full marketing firepower to Instagram, its mobile photo-sharing application, for the first time in the quarter, while boosting the number of video ads on its main application. Such efforts are working: the average revenue Facebook earned from each user climbed 24 percent to $2.97 in the latest period.
“Their core mobile-advertising business is still very strong and has a lot of runway,” said Josh Olson, an analyst at Edward Jones & Co., who has a buy rating on the stock.
Profit excluding some items was 57 cents a share, compared with analysts’ prediction for 52 cents. Net income rose to $896 million from $806 million.
The shares of Menlo Park, California-based Facebook rose as much as 5.2 percent in extended trading. The stock advanced 1.3 percent to $103.94 at the close in New York, leaving it up 33 percent this year.
Facebook has been working to improve the quality -- and therefore the price -- of ads as Chief Executive Officer Mark Zuckerberg invests in newer initiatives, from WhatsApp to scientific projects such as virtual reality and artificial intelligence. Zuckerberg said that although virtual reality is an exciting investment area for the company, he expects it to grow slowly. David Wehner, Facebook’s chief financial officer, said the company would continue to spend on virtual reality, artificial intelligence and other moves to prepare for the future, especially as the main business remains strong.
“We are investing aggressively in the future,” the CFO said in an interview after earnings were announced. “We see great opportunities.”
Facebook now has 12,000 employees, after adding 1,000 in the past quarter. Sheryl Sandberg, Facebook’s chief operating officer, is aiming for the social network to have a large impact in U.S. elections next year, adding that every member of Congress has an account.
Facebook has been working to convince advertisers that it has the most comprehensive marketing products and tools for reaching potential customers on their mobile phones. Because people sign into Facebook using their real identities, the company is better able to track and target them, boosting its appeal to marketers. By bringing Instagram into Facebook’s advertising system, the company was able to expand the ad audience by more than 400 million users.
Facebook has more than 900 million users on WhatsApp and more than 700 million on Messenger. The company has been experimenting with ways to get people to interact with brands on Messenger. Neither of those properties is delivering a meaningful boost to revenue, and Wehner said building a business is not a priority.
Facebook is expected to account for 17.4 percent of global mobile-ad spending this year, a market that’s projected to reach $72.1 billion in 2015, according to EMarketer. That compares with the researcher’s projection for Google Inc. to reach 33.7 percent in 2014.
The company makes a lot more money from its users in the U.S. and Canada than it does elsewhere. On average, revenue per user was $10.49 in the U.S. and Canada, compared with $1.39 in Asia-Pacific.
Although Facebook is blocked in China, it’s one of the company’s biggest advertising markets because exporters there are looking for ways to reach customers outside of the mainland, according to Zuckerberg. Still, he said he’s dedicated to entering China eventually.
"You can’t have a mission of connecting the world and leave out the biggest country," Zuckerberg said. "That is a situation we are going to need to find a way forward on."