Facebook's mobile business expands in first quarter

Thu May 2, 2013 11:58am EDT
 
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By Alexei Oreskovic

(Reuters) - Facebook Inc's mobile advertising revenue growth gained momentum in the first three months of the year as the social network sold more ads to users on smartphones and tablets, partially offsetting higher spending which weighed on profits.

New types of ads designed for smartphones, particularly ads aimed at enticing Facebook users to install mobile apps on their phones, helped lift revenue while traffic to the social network remained strong.

The results reassured Wall Street that the world's largest social network was keeping up with consumers' shift from PCs to smartphones, even if the company provided few big surprises during the first quarter.

Mobile ad revenue accounted for 30 percent of Facebook's ad revenue in the first quarter, compared to roughly 23 percent in the fourth quarter. Sales of ads on mobile devices have been a key element in the recovery of Facebook's overall ad revenue from a sharp slowdown early last year.

The first-quarter mobile ad revenue was at the higher end of expectations, said Macquarie Research analyst Ben Schachter. But he said it "needed to be higher for people to get really excited about trend lines".

Shares of Facebook, which are down roughly 12 percent since the end of January, were up 7 cents at $27.50 in after-hours trading on Wednesday.

"Everyone was focused on two things, one was mobile and how big it could be, and the other thing was engagement," said Ronald Josey, an analyst with JMP Securities.

Facebook delivered solid results on both fronts, Josey said, noting that consumers' use of Facebook does not appear to have declined despite a growing array of popular social networking and mobile messaging alternative services, such as Pinterest and WhatsApp.   Continued...

 
The sun rises behind the entrance sign to Facebook headquarters in Menlo Park before the company's IPO launch, May 18, 2012. REUTERS/Beck Diefenbach