Facebook Sales Top Estimates on Gains in Mobile Advertising

  • Monthly active users gained 17 percent to 1.86 billion
  • Mobile ad revenue made up 84% of company’s total ad sales

Facebook's Q4 Revenue Rises More Than Forecast

Facebook Inc.’s fourth-quarter revenue climbed more than forecast, driven by advertisers’ continued push to reach consumers on mobile phones.

The world’s largest social-media company said sales jumped 51 percent to $8.81 billion, topping the $8.51 billion average analyst projection. Monthly active users on its main social network increased 17 percent from a year earlier to 1.86 billion people, with 1.23 billion checking daily and 1.74 billion accessing it via their smartphones, Facebook said Wednesday in a statement.

Facebook has solidified its position as No. 2 in the market for mobile advertising, behind Alphabet Inc.’s Google. The Menlo Park, California-based company last year started selling more marketing spots and added e-commerce tools to Instagram, its photo-sharing app that now has more than 600 million users. Facebook also expanded video advertising, drawing ad dollars that might otherwise have gone to television commercials.

“Facebook and Google are the two foundational elements to all digital advertising,” said Brian Wieser, an analyst at Pivotal Research Group. “They’re just so big in terms of how much time people spend on the platform, and no advertisers’ goals need go unmet if they’re using Facebook.”

Mobile advertising made up about 84 percent of total ad revenue in the quarter, Facebook said.

Profit excluding some items was $1.41 a share, compared to the $1.31 average analyst estimate, according to data gathered by Bloomberg. Facebook shares rose as much as 3.6 percent in extended trading, following the report. The stock closed at $133.23 in New York.

Slower Growth

Facebook’s revenue gains had been expected to slow this year because the company has said it won’t keep increasing the percentage of ads shown in users’ News Feeds. That means it’s leaning on other growing areas, like Instagram, as well as new forms of advertising, such as ads in live video. Meanwhile, the company has said it plans to substantially increase its spending on new data centers and engineers.

“There’s effectively no change in the outlook,” Chief Financial Officer David Wehner said in an interview. “We continue to invest aggressively to grow out the business for the long term.”

Advertisers have expected better service from Facebook as the company becomes more mature. Late last year, Facebook had to correct the methodology for some of the metrics it was reporting to advertisers, which in many cases overstated user engagement. That shook confidence in the effectiveness of Facebook’s ads, though none of the revisions affected advertiser billing.

As Facebook’s influence grows, its users have also started to hold it more accountable for its role in society. Around the U.S. presidential election last year, the company faced an uproar over the use of its social network to spread fake news. Earlier in 2016, Facebook had to combat claims that it was biased against conservatives. Now, the company is part of a debate about the Trump administration’s policies, with its top two executives, Chief Executive Officer Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg, speaking out against his executive orders.

The events of the last year “reinforced the importance of connecting the world,” Zuckerberg said on a conference call.

Still, when it comes to the business, Facebook doesn’t expect to be negatively affected by any new immigration restrictions.

“We’ve got other markets in which we can recruit and grow engineering and technical teams,” like London and Tel Aviv, Wehner said.

Earlier, a federal court jury in Dallas said Oculus, the virtual reality headset maker bought by Facebook in 2014, used technology stolen from ZeniMax Media Inc. to develop its device. The jury awarded $500 million in damages to ZeniMax Media.

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