Facebook shares leap on mobile ad surge

Facebook shares leapt as much as 26 per cent on Thursday morning in New York trading after the social networking company beat analyst expectations on revenues and profits.

The shares opened 26 per cent higher at $33.44 – having surged 20 per cent in after-hours trading on Wednesday immediately after the results – to their highest level since the shares were offered at $38 apiece in May 2012’s initial public offering.

On a pro forma basis tracked by Wall Street, second quarter net income rose 65 per cent to $488m compared with the same quarter last year on revenues up 53 per cent to $1.81bn, ahead of analysts’ expectations of $1.62bn. Earnings per share of 19 cents exceeded expectations of 14 cents per share.

Sheryl Sandberg, chief operating officer, said spending increased across all categories of advertisers. Ecommerce companies, in particular, doubled spending, and the number of local businesses advertising on the site globally also doubled to 1m.

“We believe this rapid growth is driven by our unique ability to target ads,” she said. “We have one of, if not the, most effective mobile ad products.”

Mobile revenues now represent 41 per cent of ad revenues, up from 30 per cent in the previous quarter.

However, analysts have been more focused in recent months on ad products that attract new advertisers to the site, rather than mobile revenues, which mostly represent a shift of desktop sales from existing customers.

Facebook streamlined its self-service ad sales platform in June to make ad-buying simpler for new advertisers, demonstrating a focus on attracting more small and medium-sized businesses to the site.

“Payments continue to move along as people expected,” said Steve Weinstein, a research analyst with ITG. “Their outreach into small, local businesses is having a significant impact.”

Mark Zuckerberg, chief executive, said that increasing advertisers was also aimed at creating a more competitive environment for its ads auction. Ads now make up 5 per cent of the content in a user’s news feed, but Mr Zuckerberg said it is not a priority to increase that ratio further, meaning more marketers will have to bid higher to place their ads there.

The founder also took time to address ongoing speculation that users are beginning to tire of Facebook, and that teens in particular are decamping to other, newer social networks.

“You could naively assume that more new services means people spend less time on Facebook. But that isn’t happening,” he said. “We believe we have close to fully penetrated [the market] in the US teen demographic for a while, and the number of teens using Facebook on a daily and monthly basis has been steady over the past year and a half.”

Facebook earned $333m in net income in the quarter compared with a net loss of $157m in the same quarter a year ago.

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