Facebook posts strong Q4 earnings, cites growth in mobile ad revenue

Facebook Inc delivered its strongest revenue growth in two years, beating Wall Street targets as the Internet company's mobile ad sales continued to accelerate.

Shares of Facebook surged 12 percent to $59.98 in after-hours trading on Wednesday.

The world's largest social networking company said that revenue from mobile ads represented 53 percent of its total advertising revenue in the last three months of the year, or $1.24 billion, versus the 49 percent proportion that mobile ads represented in the third quarter.

(Also see: Facebook posts better-than-expected Q3 results; attributes mobile advertising)

"They've cracked the code on mobile," said Arvind Bhatia, an analyst at Sterne, Agee & Leach. "Within a little over a year's time mobile has taken over desktop," in terms of ad revenue he said.

Facebook said it now has 1.23 billion monthly users, with 945 million accessing the service on a smartphone or tablet.

(Also see: Facebook crosses one billion active users mark)

Facebook's newsfeed ads, which inject paid marketing messages straight into a user's stream of news and content, have boosted Facebook's revenue and its stock price in recent months. The ads are ideally suited for the smaller-sized screens of smartphones and other mobile devices.

(Also see: Facebook updates News Feed to display more news)

The average price per ad on Facebook has surged 92 percent in the past year, the company said, even as the total number of ad impressions on Facebook declined 8 percent.

In a conference call with analysts on Wednesday, Facebook Chief Executive Officer Mark Zuckerbergsaid the focus going forward was to improve the quality and the relevance of the newsfeed ads, rather than boosting the amount of ads in users' newsfeed.

(Also see: Facebook adds new capabilities to its mobile app ads service)

Among the other priorities for the coming year, Zuckerberg said the company would focus on creating new standalone products and on improving Facebook's nascent search product.

Daily use rising
Facebook had spooked some investors in October when it said that it noticed a decrease in daily users among "younger teens." The remarks raised fears that teen Facebook users might be drifting to new messaging services such as Snapchat and WhatsApp.

(Also see: Whatsapp the unlikely challenger to Facebook's domination)

Facebook Finance Chief David Ebersman said the company did not have an update to share about teen usage during the quarter, though the company noted that overall user "engagement" had increased throughout 2013.

Roughly 61.5 percent of Facebook's 1.23 billion monthly users visited the site every day in the fourth quarter, an increase from the 58.3 percent ration in the fourth quarter of 2012.

"The engagement on their site is going up and they're recapturing people on Instagram, so they're not losing people," said Jefferies analyst Brian Pitz, referring to the Facebook-owned mobile photo-sharing service.

Overall revenue in the fourth quarter rose to $2.585 billion, compared with $1.585 billion in the year-ago period and above the $2.33 billion expected by analysts polled by Thomson Reuters I/B/E/S.

Ebersman said that expenses in the coming year would likely increase around 35 percent to 40 percent. He did not provide a revenue forecast for 2014.

Facebook reported net income of $523 million, or 20 cents a share, versus $64 million or 3 cents a share in the year-ago period. Excluding certain items, Facebook said it earned 31 cents a share, beating the 27 cents per share that analysts were expecting.

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