Facebook doubled its mobile advertising revenue in the fourth quarter, which suggests the social networking giant's mobile strategy is starting to pay off.
Investors want to see evidence that Facebook is delivering on promises to develop a full-fledged mobile advertising business, a challenge facing many of today's technology leaders including Google.
We're doing what we think will build the best service and business over the long term.
But the growth trailed some of Wall Street's most aggressive estimates. Shares of Facebook were down roughly 3 per cent at $30.21 in after-hours trading on Wednesday, regaining ground after falling more than 8 per cent immediately after the numbers were released.
Mobile revenue estimates among some analysts and investors were unreasonably high, said Sterne, Agee & Leach analyst Arvind Bhatia.
"As a result the stock was set up for disappointment," he said. Overall, he said, Facebook's results were encouraging.
The company's overall advertising business grew at its fastest clip since before its May initial public offering, helping the company's revenue expand 40 per cent and surpass Wall Street targets.
Facebook has rolled out a wide variety of new services in recent months as the company seeks to stay ahead in the fast-moving Web market and to convince Wall Street that it can turn its audience of more than 1 billion users into a sustainable business.
Zuckerberg said the company plans to spend heavily on staff recruitment in 2013 as the company pushes forward with new product development, particularly "mobile-first" services.
"We aren't operating to maximize our profit this year but we're doing what we think will build the best service and business over the long term," Zuckerberg said during a conference call with analysts on Wednesday.
Future opportunities
Facebook shares, which lost more than half their value following a rocky IPO, have regained ground in recent months as concerns about its mobile ad business and insider selling have eased. Shares have surged roughly 60 percent since mid-November.
Zuckerberg said that recently introduced products such as its new social search tool could become important businesses in the future. But in the near term he said Facebook's advertising efforts will be the core of its business.
The number of monthly active users on the social network reached 1.06 billion at the end of last year, with 618 million daily active users, Facebook said.
But much of that growth again came from emerging markets like Asia, rather than the United States or Europe, where revenue per user is several times higher. For instance, average revenue per user is $13.58 for the United States and Canada, but just $2.35 in Asia.
Overall fourth-quarter revenue came to $1.585 billion, up 40 per cent versus $1.131 billion a year earlier. Analysts were looking for revenue of $1.53 billion.
Executives said some revenue from its payments business dating back to September 2012 had been booked in the October-December quarter, inflating the number somewhat. Excluding those deferred sales, overall revenue would have been up just 34 per cent in the quarter.
But it was the fledgling mobile business that dominated Wednesday's discussion on the call. Finance Chief David Ebersman said Facebook had "basically doubled" mobile ad revenue from the third quarter to the fourth quarter.
"Two quarters ago we really had no mobile revenue," Ebersman told Reuters in an interview. "In the course of a pretty short period of time, we've dramatically ramped up our ability to monetize mobile."
