July 24, 2013, 4:52 PM

Facebook makes mobile progress

Mobile ads account for 41% of the social network’s ad revenue in the second quarter.

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Facebook Inc. reported today that it generated $1.599 billion in advertising revenue in the second quarter, a 61.2% jump from $992.0 million during the same period in 2012 and a 28.45% increase from $1.245 billion in the first quarter of 2012.

Facebook says that 41% of its advertising revenue in the second quarter stemmed from ads it presented to consumers on mobile devices, up from 30% in the first quarter. That means mobile ad revenue increased 75.5% from $373.5 million in Q1 to $655.6 million in Q2.

That sharp rise in mobile advertising follows Facebook’s plans to refashion itself into a mobile-first platform and address investor concerns that Facebook’s revenue growth would tail off as consumers increasingly accessed the social network via smartphones and tablets. For example, in April the social network revamped pages to fit the way people look for information on their mobile devices. A page is a business’s identity on Facebook, where consumers go looking for information and deals. Earlier this year it also released several mobile-focused tools for developers, including one that lets mobile developers integrate its Open Graph into apps through new application programming interfaces, or APIs. The Open Graph is the sum total of a consumer’s activity and profile information on Facebook.

“Nearly half a billion people use Facebook on their phones everyday and soon we’ll have more revenue on mobile than on desktop as well, said Mark Zuckerberg, Facebook CEO, yesterday in a conference call with analysts. "This progress is the result of investments we started making more than a year ago.”

For the quarter ended June 30, Facebook reported:

  • $1.81 billion in total revenue during the quarter, a 53.4% increase from $1.18 billion in the same quarter of 2012.
  • U.S. advertising revenue in the second quarter grew 50.5% to $721 million, up from $479 million in the same period a year earlier.
  • The social network generated average revenue of $1.60 per worldwide user in the second quarter, up 25.0% from $1.28 a year ago. Facebook calculates average revenue per user as its total revenue during a given period, divided by the average of the number of monthly active users at the beginning as well as the end of the period; that is why the average revenue per user doesn’t equal revenue divided by its number of active users.
  • In the United States and Canada the average revenue per user was $4.32 per user, up 35.0% from $3.20 a year ago.
  • The social network earned $333 million during the quarter, compared to a $157 million loss a year earlier.
  • 1.15 billion monthly active users, up 20.4% from 955 million a year earlier.
  • 819 million mobile monthly active users, up 50.8% from 543 million in 2012.
  • 699 million daily active users in June, up 26.6% from 552 million a year earlier.
  • 130 million Instagram active users.

For the first half of the year, Facebook reported:

  • $3.27 billion in total revenue, a 177.1% increase from $1.18 billion in 2012.
  • Advertising revenue of $2.84 billion, up 52.7% from $1.86 billion in 2012.
  • U.S. advertising revenue of $1.27 billion, 41.4% jump from $898 million a year earlier.
  • A profit of $552 million, up from $48 million a year earlier.

Zuckerberg noted that ads, on average, make up about 5% of the stories in users' news feeds. That's a marked shift from a little more than a year ago when the social network began placing ads in the news feed. However, he said that Facebook hasn't measured a meaningful drop in satisfaction because of the ads.

"With that said, in recent studies people have told us that they noticed the ads more, so we're going to invest more in improving the quality," he said. "Our top priority is to expand the number of marketers and overall demand in our system rather than just increasing the number of ads that we show. We believe that this will help us improve the quality of the ads that we show by creating a more competitive auction and this will create the best experience for people who use our products, the best returns for more marketers and the best results for us."

Facebook's efforts to drive growth are paying off, wrote Colin Sebastian, an analyst with R.W. Baird Equity Research. "E-commerce and local advertisers are driving a disproportionate amount of its growth, likely accelerating the shift from smaller scale display platforms and offline channels."

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