Facebook quarterly profit surges 34% and revenue rises 48%

Facebook is on a roll, but executives took Wednesday's earnings announcement as an excuse to say the company is just getting started.

The social network reported profit of $701 million in the three months ended Dec. 31, up 34% from a year earlier. Revenue for the quarter was up 48% to $3.85 billion.


Annual net profit rose 96%, to $2.94 billion.

Its bet on mobile advertising seems to be paying off handsomely. Mobile ads brought in $2.47 billion for the quarter, representing 69% of total ad revenue and up from 53% last year. Across all devices, ad revenue hit $3.59 billion, also up 53%.

Strong stuff — but the focus Wednesday was on the future.

"For the next decade Facebook is focused on its mission of connecting the entire world," as the ever ebullient Facebook Chief Executive Mark Zuckerberg put it.

Wedbush Securities analyst Shyam Patil said it's early days for Facebook's investments, such as its $2-billion 2014 acquisition of virtual reality company Oculus VR and its $19-billion purchase of mobile message app WhatsApp, and it "may not be clear to everyone right now whether what they're working on will be successful or make sense." But, given Facebook's track record, Patil said investors seem willing to give the company the benefit of the doubt.

On a more prosaic level, Facebook President Sheryl Sandberg said the company is poised to make Facebook advertising "critical" to global ad campaigns. For multinational brands and ad agencies, she said, online marketing and advertising is "just a small part of what they do." But recent acquisitions that help Facebook measure ad effectiveness are helping Facebook make the case that advertisers can get a lot more for the money they're now spending in print and on television.

Ad buyers "are bigger believers because we've had the opportunity to do a lot more measuring over the last year," she said. The quantitative approach is allowing Facebook to demonstrate that its ads aren't simply viewed by users, but are moving products "off the shelves," she said.

Facebook is making a big push in video, which Sandberg also expects to appeal to traditional advertisers because, as she put it, it's a form of marketing they "have used a long time."

The consistent growth in mobile-driven ad revenue shows that Facebook's mobile advertising strategy is working. The company introduced the ability for advertisers to buy ads across both its Web and mobile platforms in early 2012 in an attempt to steer marketers toward its growing mobile audience. It added the option of mobile-only ads in June the same year.

Facebook will continue to invest in its mobile ad business, Sandberg said, pointing to the rollout of ads on Instagram in Australia and Canada as a taste of what's to come. The popular photo-sharing app has not produced much revenue yet, but Facebook expects that to change.

On Facebook's acquisition of WhatsApp, which has yet to demonstrate a strong revenue model, never mind any significant revenue, Zuckerberg said "it's really important to get this right and not rush into it." He noted that in 2006 and 2007, when Facebook itself had little revenue, he was being pressured to slap up banner ads. Instead, Facebook decided to "figure out what people wanted" before crafting a long-term revenue strategy. If Wednesday's results are an indication, that was the right move.

Twitter: @traceylien