Facebook Quiets Skeptics With Audience Growth and Mobile Money

Investors in Facebook who were anxious about a possible slackening in the social network’s membership growth can stop worrying. The company says 170 million new users joined the service over the last year, bringing its total to 1.23 billion active monthly users around the world.

Here’s a little bit of context: Facebook added the equivalent of 73 percent of Twitter’s user base to its membership rolls in 2013.

That startling statistic came Wednesday afternoon amid an upbeat earnings report from the world’s largest social network. Continuing the trend in recent quarters, Facebook reported strong revenue growth with sales of $2.59 billion, up 63 percent since the same quarter last year and beating analyst estimates of $2.34 billion in revenue. Earnings per share were 31¢ excluding certain accounting items, besting analyst estimates of 27¢.

The strong quarter caps a breakout 2013 for Facebook, which recorded revenue of $7.87 billion for the year, a 55 percent jump from 2012. The stock surged nearly 6 percent in after-hours trading.

Facebook’s ad business on mobile phones was particularly strong. For the first time in its history, the company reported that revenue from advertising on mobile phones exceeded half (53 percent) of all its advertising for the quarter. That caps a remarkable turnaround, considering that fears about the company’s position on phones weighed down its stock price during and immediately after its initial public offering in May 2012. The skeptics back then lost out big. Facebook stock is up 41 percent since its IPO and almost 200 percent since the low in its stock three months later.

Mark Mahaney, an analyst at RBC Capital Markets, says the stock market overpenalized Facebook for its mobile challenges after its IPO and now may be overrewarding it for fixing its problems. Nevertheless, he calls it “one of the most impressive pivots I’ve seen in Internet history.”

The positive earnings report will likely overshadow the challenges still facing the company as it hits its 10-year anniversary next Tuesday. Multiple reports suggest it is losing connection with teenagers, who are deserting Facebook for such apps as Snapchat and WhatsApp. Its ad business on mobile phones is also weighted toward promotions for other apps—a business that could see a rapid falloff if the currently buoyant Silicon Valley tech community cools down.

Still, Facebook Chief Executive Mark Zuckerberg had good reasons to crow a little. “It was a great end to the year for Facebook,” he said in a statement. “We’re looking forward to our next decade and to helping connect the rest of the world.”