Facebook cites mobile for revenue lift

Facebook’s advances in mobile advertising helped spur a 32 per cent grow in revenue in its third quarter.

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Facebook’s first brand ‘ad’ to celebrate reaching 1 billion users.

Mobile now accounts for 14 per cent of Facebook’s advertising revenues, which founder and chief executive Mark Zuckerberg claimed “dispels the myth that [the site] can’t make money on mobile” in a call with analysts.

As part of its moves to improve its mobile advertising offer and better monetise its now 604 million monthly active mobile users, Facebook introduced mobile app install ads – allowing developers to pay to insert ads that allow users to install apps from the news feed – and it started testing a mobile ad network.

Zuckerberg says people who use Facebook’s mobile products are “more engaged” and the company believes it can increase engagement even further as it introduces new advertising products and improves the user experience on smartphones.

He added that he believes mobile ads will soon be more like those on TV: “high quality and integrated into the experience rather than off to the side [of the screen]”. Ads in the newsfeed are already generating $3m (£188m) for the company a day, Facebook claims.

Revenue for the three months to 30 September increased 32 per cent year on year to $1.26bn (£813m), of which advertising represented 86 per cent of the total – a 36 per cent increase from the same period last year.

The revenue generated from payments and fees from applications and games grew 13 per cent year on year to $176m (£110m), but this was a decline of 9 per cent quarter on quarter.

Zuckerberg admitted in the analysts call: “Gaming on Facebook isn’t doing as well as I’d like”.

Payments from Zynga, which owns Facebook games such as Farmville and Draw Something dropped 20 per cent, news which came as the gaming company announced it will be reducing its workforce by 5 per cent to arrest a steep decline in its revenues.

Facebook reported a net loss of $59m, compared with a profit of $227m (£142m) last year, which it blamed on a tax provision for stock compensation.

The company’s share price, which has been tumultuous since the company went public earlier this year, was up 11.7 per cent in pre-market trading to $21.79 (£13.63). Its debut price was $38 (£24).

Victor Malachard, CEO of mobile ad network Adfonic, says the pace of Facebook’s mobile growth is encouraging.

He adds: “It is clear that their mobile products - like the news feed slots which show up easily on mobile - are having an impact. With Facebook saying it can charge a 7 per cent premium for this type of ad due to the ability to target it more closely based on user data, the potential seems significant.

“We have long expected Facebook to mine its user data more effectively as it could be a secret sauce for its own mobile ads in particular, or even form the basis of Facebook looking at mobile ads beyond its own inventory.”

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