Facebook posts higher revenues but no profit

24 Oct 2012 | News - Comment now

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Facebook posts higher revenues but no profit

Social media giant Facebook (NASDAQ:FB) has reported that quarterly revenues exceeded expectations, but it still made a loss overall after incurring higher costs.

The company generated $1.26 billion (£0.79 billion) in the third quarter, driven by a spike in its advertising revenues, which rose by a third to $1.09 billion (£0.68 billion). However, the firm’s expenses also leapt by two-thirds to $885 million (£554 million), leading to a quarterly loss of $59 million (£37 million).

But Facebook’s chief executive, Mark Zuckerberg, was most excited by the group’s progress in mobile advertising. ‘I want to dispel this myth that Facebook can’t make money on mobile,’ he stated. ‘This may have been true six months ago, because we hadn’t started trying yet.’

Now, though, Facebook makes 14 per cent of its money from advertising on mobile devices, contributing over $150 million (£94 million) during the quarter. More users are accessing the site on mobiles too: the number of monthly active users visiting on such gadgets soared by 61 per cent to 604 million over the past three months.

‘Our opportunity on mobile is the most misunderstood aspect of Facebook today,’ added Zuckerberg. His chief financial officer, David Ebersman, noted that the company had earned $3 million (£1.9 million) a day since July from adverts in members’ mobile newsfeeds.

An essential element of Facebook’s mobile march has been its subsidiary Instagram, which specialises in mobile photo apps. Having purchased the profitless start-up for $1 billion (£0.63 billion) in April 2012 for its mobile expertise, Zuckerberg highlighted that its 100 million users – up from 27 million at the time of the acquisition – now spend more time on it than on Twitter.

Zuckerberg also acknowledged difficulties at Facebook’s main revenue partner, Zynga, the games developer behind FarmVille. Payments from Zynga to Facebook fell by 20 per cent over the quarter, and Zuckerberg admitted that ‘gaming on Facebook isn’t doing as well as I’d like’.

Shares in Zynga have lost three-quarters of their value since the company began trading publicly in December 2011, and it confirmed earlier in the week that it would have to lay off 5 per cent of its employees.

Facebook’s stock has been similarly troubled since its listing in May this year. From their initial price of $38 (£24), its shares have slid to around $20 (£12.50) over the past few weeks, unmoved even by the announcement of Facebook’s one billionth member earlier in October.

But the market responded well to Facebook’s quarterly results, as shares jumped by 14 per cent to $22.19 (£13.86). This, though, still leaves the group valued around $41 billion (£25.6 billion), far below the $100 billion (£62.5 billion) peak hit five months ago.

Related topics: Technology, US equities Facebook

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