Facebook said Wednesday that it generated $2.59 billion in revenue in the fourth quarter of 2013, easily beating analyst estimates and sending shares surging almost 12 percent in after-hours trading.
“We’re very pleased with the growth of our ad business, especially on mobile,” CEO Mark Zuckerberg said on a conference call with investors. “I expect 2014 will the year when we begin to deliver new and engaging types of mobile experiences.”
Profits reached $523 million, up from $64 million a year ago, the company said. Mobile usage of the site continued to grow, with monthly mobile active users growing to 945 million, a 39 percent increase from a year prior. Mobile ad revenue reached 53 percent in the fourth quarter and for the first time comprised more than half of Facebook’s total advertising business. Overall, the site now has 1.23 billion monthly active users and 757 million daily active users.
The strong earnings report capped an impressive 2013 in which Facebook fully recovered from a botched IPO in 2012 that tanked its stock for months. For all of 2013, Facebook generated $7.9 billion in total revenue, a 55 percent increase from 2012. Profit for the year totaled $1.5 billion, compared to just $53 million in 2012. The company added 172 million monthly users and 139 million daily users. By comparison, Twitter enjoys 232 million total monthly users, and LinkedIn has 259 million.
There’s reason to believe that Facebook’s ad business has considerable upside in 2014, too. Chief Financial Officer David Ebersman noted that the social network’s ad prices increased by 92 percent in 2013, and the company expects the value of its ads to keep rising. “If we continue to focus on quality of ads… that’s a way we can drive price up in the future,” he said.
Video ads in the News Feed, which Facebook began experimenting with in December, will help the company increase its asking price. The commercials, which auto-play without sound, could help the company begin to capture lucrative advertising dollars from the television industry. Analysts project that the company might generate $1 billion in revenue from video ads in 2014 alone. Instagram, which began showing ads in November, could become another cash cow. The photo-sharing network has 150 million monthly users and is trying to court valuable brand advertisers like Michael Kors and General Electric instead of direct-response marketers that are the typical online advertisers.
Despite the impressive results, Facebook will continue to face questions about its ability to retain the interest of its youngest users. During a conference call with investors in October, the company acknowledged that it had observed a slight decline in daily usage by young teens. Startups like Snapchat have taken away some of Facebook’s cachet among the younger set. In its earnings call Wednesday, the company said it had nothing new to report regarding teen usage.
Overall, though, Facebook is riding high as it approaches its 10th birthday. It has effectively put to the rest the question of whether it could become a mobile-first company, and the assertions that it would collapse by 2017 are looking increasingly silly. “We’re still a small part of the world’s population,” Zuckerberg said of its user base.