SAN FRANCISCO — As Facebook reported another quarter of strong revenue and profit growth on Wednesday, its executives made one thing very clear: The company’s money machine has just begun to spit out the cash.þþTwo out of three of Facebook’s 1.28 billion monthly users log in to the social network every day, the company said. Americans spend about one-fifth of their time on mobile phones checking Facebook, according to comScore, a research firm.þþBut when it comes to making money from that affection — by selling ads — Facebook says it has only scratched the surface.þþUsers are seeing a steady stream of ads in their news feeds, but the company is moving slowly on two promising categories of advertising: full-motion video ads and image ads on its Instagram photo-sharing service. And a plan for a network that would serve its type of targeted ads inside other companies’ mobile apps is still in the early testing phase.þþCruising on existing ad products, the company reported that revenue increased 72 percent in the first quarter and net income nearly tripled. Advertising grew at its strongest rate in three years, with 59 percent coming from mobile ads — double the level of a year ago.þþ“They are essentially telling investors they will be able to sustain premium growth rates for the foreseeable future,” said Mark Mahaney, an Internet analyst with RBC Capital Markets.þþMark Zuckerberg, the company’s chief executive and co-founder, spent much of a conference call with investors and analysts discussing what Facebook wasn’t yet ready to make money from.þþMr. Zuckerberg said it would be a couple of years before Facebook tried to make serious money from Instagram, its Messenger app, and WhatsApp, another messaging service that Facebook agreed to buy for as much as $19 billion. The company also agreed to acquire Oculus VR, a virtual reality technology company.þþMr. Zuckerberg said he would prefer to first focus on increasing the number of people using each service.þþ“We believe these apps have a lot of room to grow and will start to be important businesses in the future, but monetization isn’t our near-term priority,” he said.þþFacebook had revenue of $2.5 billion in the quarter, up from the $1.46 billion it reported in the same quarter last year. The company’s net income was $642 million, or 25 cents a share, up sharply from $219 million, or 9 cents a share, last year.þþExcluding certain expenses, including stock-based compensation costs, Facebook had a profit of $885 million, or 34 cents a share, for the quarter. On that basis, analysts had expected the company to have a profit of 24 cents a share on revenue of $2.36 billion.þþThe company also announced that its chief financial officer, David Ebersman, planned to step down on June 1.þþMr. Ebersman, who helped lead the company through its rocky initial public offering and first two years as a public company, will be succeeded by David Wehner, Facebook’s vice president for corporate finance and business planning.þþShares of Facebook rose about 3.5 percent in after-hours trading on Wednesday after falling about 2.7 percent at the close.þþFor the last two years, Facebook has been growing like a beanstalk in mobile advertising, gaining ground against Google, its chief rival. Mobile was 59 percent of advertising revenue in the quarter, up from 30 percent a year ago.þþFacebook accounted for 17.5 percent of the $18 billion spent on mobile ads worldwide last year, compared with a 49.3 percent share for Google, according to the research firm eMarketer.þþThis year, eMarketer predicts, advertisers will spend much more on mobile ads — nearly $32 billion globally — and Facebook will take 21.7 percent of the market. Google’s share is expected to drop to 47 percent.þþThe battle for the attention of smartphone users has prompted Facebook, Google and Twitter to develop new products to serve ads to mobile users inside a wide range of apps.þþTwitter announced last week that it would begin offering application install ads, a popular type of ad that prompts smartphone users to install new apps or fire up dormant ones.þþThis week, Google announced that it, too, would sell targeted app install ads and allow advertisers to send users directly to specific pages within an app.þþSuch ads have been a cash cow for Facebook.þþWhile Facebook can’t stop the new competition, it is also moving into new territory. Next week, the social network is expected to announce a new mobile ad network that will allow marketers to use the reams of personal data that Facebook has about its users to send targeted pitches to people when they are using non-Facebook apps on their phones.þþFacebook’s users aren’t just clicking on ads. Engagement with many types of content on the sites — likes, clicks and shares — is going up, according to Tamara Gaffney, principal analyst for the Adobe Digital Index.þþVideos, which began automatically playing in users’ news feeds late last year, have been particularly strong, said Ms. Gaffney, whose company provides ad management services and analytics to legions of advertisers.þþIn the first quarter, Facebook users played 785 percent more videos from brands than in the same quarter the previous year, Adobe found.þþFacebook said that it had no plans to really rev up video advertising this year. When it does, it is likely to turn into a major revenue source, said Mr. Mahaney, as will ads from Instagram.þþ“It’s great to be Facebook these days. The core business is doing very well. And they have these two very large potential revenue growers,” he said.þþ
Source: NY Times
