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Facebook's profits surge on strength of mobile ads

“We see a lot of opportunity ahead as we connect the rest of the world,” Facebook founder and CEO Mark Zuckerberg said.

Associated Press (2013)

“We see a lot of opportunity ahead as we connect the rest of the world,” Facebook founder and CEO Mark Zuckerberg said.

Facebook seems to have figured out — for now at least — the holy grail for all media: how to make money selling mobile ads.

The social network this week reported $791 million in profit in the second quarter, more than twice what it made in the same quarter last year. Revenue was up 61 percent to $2.91 billion. Both figures beat analysts' expectations. The company's stock closed Friday at $75.20. It has risen nearly 38 percent since the start of 2014 and more than doubled over the past 12 months.

"We had a good second quarter," founder and chief executive Mark Zuckerberg said. "Our community has continued to grow, and we see a lot of opportunity ahead as we connect the rest of the world."

What is Facebook's advantage? It has reams of data to ensure the ads that appear on mobile devices fit users' interests and tastes. It runs such a massive service that even a decade after its founding, nearly a billion people still use it every day. And more of those people are logging in on their mobile devices.

That jump in mobile users was a major concern when Facebook headed into its initial public offering two years ago because — as many tech and media companies have discovered — it's more difficult to make money off small, mobile ads than desktop ads.

Those concerns prompted Facebook in 2012 to focus on building its advantage in mobile advertising, an area long ruled by Google. At the start of 2012, Facebook had no mobile ad revenue. By the end of that year, it accounted for 5.4 percent of the global mobile advertising market, according to the advertising analysis firm eMarketer. And it has continued to grow.

This year, analysts project it's primed to take 21.7 percent of all mobile ad spending.

Facebook now makes much more than half of its revenue from ads served to smartphones and tablets. Facebook also has begun focusing on how to reach people even when they're not on the Web, announcing earlier this month it has seen early success in driving people directly from Facebook's app to other apps and back.

The company also has begun incorporating information from sites users visit outside its network, increasing the network's vast stores of data and allowing it to tailor ads even more carefully. This makes each Facebook user more lucrative. The pursuit of that data has landed the company in hot water. Most recently, Facebook ran into trouble with users after some of its researchers disclosed they used the social network to run a mood experiment on them.

Still, the number of people using Facebook continues to grow. It reported 1.32 billion users log in at least once per month, up 15 percent from the same time last year, and 829 million people sign in every day, up 19 percent from last year.

Surging stock

$75.20

Facebook's per-share closing price Friday

$20.55

Gain in 2014, nearly 38 percent

$17.55

Lowest price for the stock, in September 2012, four months after its initial public offering

328%

The stock's climb since hitting its low point

Facebook's profits surge on strength of mobile ads 07/25/14 [Last modified: Friday, July 25, 2014 8:52pm]
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