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Facebook becomes a mobile company at last

Mobile users overtake those on PCs and the social network seems to have found a way to monetize that


Published: 31 January, 2013

READ MORE: Financial | Facebook | Advertising | Applications

Facebook's struggles to turn its huge mobile traffic into profits overshadowed its IPO last year, and its subsequent share performance. However, 2013 may mark a turnaround, as mobile advertising generated almost 25% of sales in the social network's fourth quarter.

Mobile users overtook their PC equivalents for the first time in Q4, which suggests Facebook is starting to overcome its self-avowed difficulty in turning cellular traffic into gold. As Google noted in its own recent results, mobile ads - while harder to sell because of the limited space on the handset screen, and user resistance - are more profitable than PC versions.

In Q412, CEO Mark Zuckerberg declared on the earnings call, "we connected over a billion people and became a mobile company" at last. Mobile revenues accounted for 23% of total advertising sales, up from 14 in the third quarter of 2012.

Total Q4 revenue was $1.585bn, up 40% year-on-year. Revenue from advertising was $1.33bn,or 84% of the total. But net income fell to $64m from $302m a year ago, on the back of rising "costs and expenses" which topped $1bn, up 82%.

The number of Facebook's monthly active users stood at 1.06bn at the end of last year, up 25% on the year-ago period, and mobile users were 680m, up 57%. The number of daily active users (DAUs) was calculated at 618m, exceeding web-based DAUs for the first time.

It was once unclear how Facebook would monetize its mobile presence as people spent less and less time on the desktop version of the social network, but this doesn't seem to have been a problem. Less than a year ago, Facebook made no money from its mobile apps, now it contributes 23% of its ad revenue. That's an increase of 14% form the third quarter.

This has been achieved by simply adding adverts to the news feed. Commenting on the financial results Mark Zuckerberg expressed some surprise that monetizing the apps should have been so simple. There was no big protest from users about the move and it has had a negligible affect on their engagement with the app.

Considering it has done so well with little fine tuning to the way it presents its adverts, it's safe to assume that when the company does refine its approach, profits should further improve. Mark Zuckerberg is so confident in this possibility that he believes Facebook can earn more money from its mobile alternatives than its website.

"Today there's no argument. Facebook is a mobile company. As I've said before, there are three main parts of our strategy. Build the best mobile product, build a platform and services that leverage the social graph and build a really strong monetization effort" said Zuckerberg on the earnings conference call.

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