Facebook revenue exceeds estimates as mobile ads gain ground

Facebook Inc.’s first-quarter sales topped estimates, a sign that Chief Executive Officer Mark Zuckerberg is making headway in a drive to make more money from mobile ads.

First-quarter sales rose 38% to $1.46 billion, Facebook said in a statement today. That compares with the average estimate of $1.44 billion, according to data compiled by Bloomberg.

So far this year, Facebook has unveiled new software for smartphones, added tools for marketers and revamped News Feed, the first thing members see when logging onto the network of more than 1 billion. Investments in upgrades to attract more users on mobile devices and advertisers are beginning to pay off, according to Michael Pachter, an analyst at Wedbush Securities Inc. in Los Angeles.

“They’re monetizing it better and better and better,” said Pachter, who rates the shares outperform. “They’re making progress -- and dramatic progress.”

During the first quarter, mobile made up about 30% of advertising revenue, expanding from 23% during the fourth quarter. Pachter had predicted about 25%.

Facebook, based in Menlo Park, California, were little changed in extended trading. The shares declined 1.2% to $27.43 at the close in New York, leaving them down 28% since the company’s initial public offering a year ago.

Advertising Dollars

First-quarter profit excluding certain items was 12 cents a share, compared with the average analyst projection of 13 cents. Operating costs rose 60% to $1.09 billion, as Facebook added more staff and poured money into computer systems and software.

Net income attributable to shareholders rose 58% to $217 million, compared with $137 million a year earlier.

Facebook is projected to grab 13% of U.S. mobile-ad dollars this year, up from 9.5% in 2012, according to EMarketer Inc. The total market will reach $7.29 billion in 2013, up 77% from 2012, the research firm said.

The company expanded the frequency of ads members saw on smartphones and tablets in the first quarter, according to Spruce Media, a San Francisco-based research firm.

Facebook has pushed ahead with new products to get users to spend more time using its service on mobile devices. Last month, the company introduced Home, software that integrates features more deeply into some smartphones using Google Inc.’s Android operating system. The company also made improvements to a tool used by businesses to reach consumers using mobile devices.

User Growth

The number of users on Facebook rose 23% to 1.11 billion from a year earlier, the company said in the statement. Mobile users grew 54% to 751 million, making up 68% of the total.

The number of Instagram users jumped to 100 million, from less than 10 million a year earlier when Facebook acquired photo-sharing service, making the application a potential source of future growth.

Chief Accounting Officer David Spillane is leaving, Facebook said in a separate filing. He will be succeeded by Jas Athwal as of May 10, the company said.

Bloomberg News

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