Coverage: Facebook earnings show gains

Remember when there was a question about if Facebook was going to continue to show earnings growth? Well, the company answered it this quarter.

The Washington Post story by Hayley Tsukayama pointed out several things to consider about the report:

Facebook announced its latest earnings Thursday, reporting that it made $701 million in profit.  Sure, those aren’t Apple numbers, but they’re not too shabby. Here are the highlights from the earnings report.

2014 was the first time Facebook topped $10 billion in annual revenue: Facebook’s revenue for all of 2014 totaled $12.47 billion, up 58 percent from 2013. This past quarter alone, the company recorded $3.85 billion in revenue.  This is also the first time that Facebook topped $3 billion in advertising revenue.

Facebook, however, didn’t score record profits — the result of a lot of spending. That shrinking margin may be what sent the stock down slightly in after-hours trading, about 1.6 percent from its closing price of $76.24 per share.

Mobile ads now make up 69% of Facebook’s revenue.

Reed Albergotti wrote for The Wall Street Journal that despite lower usage growth, the company is finding ways to make more money off users:

The 3% increase in daily active Facebook users last quarter was the lowest since 2012. The share of users who visit daily, which Facebook terms “engagement,” remained flat at 64%, the first time that ratio didn’t increase since the company went public more than two years ago.

Still, it is collecting more advertising revenue for each user. Globally, that figure rose 31%, to $2.81, compared with $2.14 in the same quarter a year earlier.

In the U.S. and Canada, Facebook’s most-developed market, revenue grew even faster, to $9 a user, up from $6.03.

Most of Facebook’s user growth is outside North America, where spending on advertising pales in comparison. In its Asia-Pacific region, average revenue was $1.27, and elsewhere it was 94 cents.

Facebook said 85% of its users now access the network via mobile devices, and more than a third access it exclusively via mobile. Advertisers are following: Facebook said 69% of its $3.6 billion in advertising revenue came on mobile devices, up from 53% of advertising revenue in the year-earlier period.

The New York Times story by Vindu Goel offered these details about the increase in revenue per user:

Although Facebook does not charge its users for its services, the company still manages to make a great deal of money from them by selling advertising targeted to each person’s habits and interests.

The company said it brought in an average of $9 in revenue per American and Canadian user during the quarter. European and Asian users are much less lucrative, while newer areas of focus for the company, like Africa, bring in virtually no revenue. Over all, the average Facebook user was worth $2.81 to the company in the quarter.

Video, which Facebook began highlighting last summer, was particularly strong in the quarter, the company said, with users viewing three billion videos a day.

“In just one year, the number of video posts per person grew 75 percent globally,” said Sheryl Sandberg, Facebook’s chief operating officer, during the investor call.

The Fortune story by Adam Lashinsky pointed out that Facebook’s money gave it the ability to think big and long-term:

Indeed. Zuckerberg did something unique for an investor earnings call: He shared a three-, five-, and 10-year vision for his company. The three-year vision includes creating better services for people and, critically, businesses while growing Facebook’s “community.” The five-year plan envisions making businesses of WhatsApp and Messenger, an acquisition and a separate messaging app, respectively. The 10-year plan involves Zuckerberg’s goal of helping every person in the world obtain an Internet connection (through his Internet.org project) and then plopping them down into a virtual-reality world stemming from Facebook’s Oculus VR purchase.

It’s the kind of stuff that only a company that’s printing money from its gigantic audience can afford to think about.

Toward the end of the earnings call an investor asked Zuckerberg if it made sense to spending so much money to provide Internet connections to customers who wouldn’t generate sufficient revenue for Facebook to recoup the investment. Why, the analyst asked, does this matter to investors? Zuckerberg’s response neatly summed up his thinking about Facebook. “It matters to the kind of investors that we want to have because we’re a mission-focused company,” Zuckerberg said. “Part of the sub-text of your question is that if we were only focused on making money we’d simply focus on selling more ads in the U.S. But that’s not the only thing we think about here.”

But it does think about making money, and it is obvious Facebook has figured out how to do it. It also has a lot of information about target demographics that many companies would like to use in their advertising. The company has obviously figured out how to make money from mobile and other advertising. That’s something investors can get excited about.