Business Today

Facebook revenue grows 49 per cent in Q4, beats Wall Street target

Mobile ads for smartphones and tablets accounted for 69 per cent or $2.48 billion of advertising revenue in the fourth quarter.

Alexei Oreskovic | January 29, 2015 | Updated 09:44 IST
Facebook revenue grows 49% in Q4
Photo: Reuters

Facebook's revenue grew 49 per cent in the fourth quarter, as mobile advertising growth helped the world's largest Internet social network beat Wall Street's targets for earnings and sales.

But revenue growth was the weakest since the start of 2013, and spending rose faster. Facebook shares fell about 2.6 per cent in after-hours trade after vacillating above and below the closing price.

Facebook's business has boomed thanks to its mobile ads for smartphones and tablets. Its success contrasts with other established Internet companies such as Google and Yahoo, which have struggled as advertisers shift more and more to mobile devices from personal computers.

"They are taking share of advertising dollars online. They are taking share of overall advertising budgets," said Ronald Josey, a JMP Securities analyst, noting the strong quarter.

The company said on Wednesday it ended 2014 with 1.39 billion monthly users, with 86 per cent of them accessing its service on smartphones and other mobile devices.

Mobile ads accounted for 69 per cent of advertising revenue in the fourth quarter, or $2.48 billion.

Many investors are betting that video ads, which Facebook began offering last year, will provide the company's next leg of growth.

Chief Financial Officer Dave Wehner said in an interview the company still had a lot of hard work to do and was optimistic about video. "We have great marketer interest in video. It's a creative medium that they know how to use effectively," he said.

Facebook has warned that 2015 will be a year of heavy investment, as the company steps up efforts to expand a collection of products that include messaging service WhatsApp, photo-sharing service Instagram and virtual reality headset maker Oculus Rift.

Facebook's revenue growth during the fourth quarter was exceeded by its operating expenses, which grew roughly 87 per cent as a result of sharp increases in research and development costs and marketing and sales spending.

Operating expenses are "ramping up faster than we would have liked," said Ben Schachter, an analyst at Macquarie Research.

Facebook's fourth-quarter overall revenue rose to $3.85 billion from $2.59 billion in the year-ago period. Analysts polled by Thomson Reuters I/B/E/S had forecast $3.77 billion.

Facebook said it earned 54 cents a share, excluding certain items, in the fourth quarter, beating the average analyst estimate of 49 cents.


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