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Facebook mobile ad spend surges as profits hit $425m

31 Oct 2013
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Facebook has quelled investor fears that it was not making enough money from its mobile platform, with its latest Q3 financial results revealing that half of all advertising revenue comes from smartphones and tablets.

However, some investors were less impressed with Facebook's unwillingness to increase the amount of ads shown to users.

Facebook posted profits of $425m on $2bn revenue in the three months to September, a complete turnaround from its $59m loss in the same quarter of 2012. Profits were also up when compared with the previous quarter of this year, in which the firm's profits hit $333m.

Facebook now attracts 728 million daily active users and 1.19 billion monthly active users, 874 million of which access the service via mobile devices.

Much attention has been paid to Facebook's ability to monetise its mobile products, but the firm has proved this year that it is able to do so. This quarter, 49 percent of Facebook's $1.8bn advertising revenue came from the site's mobile offering, up from 41 percent in Q2 2013.

By comparison, rival social network Twitter - currently in the process of floating on the stock market - generates a healthy 64 percent of its advertising revenue from mobile devices.

However, Facebook's stance on the number of ads it shows to users provoked many questions from analysts and investors during Wednesday's earnings call. In the third quarter of 2013, News Feed advertisements – which appear in the stream of content posted by friends – made up around five percent of any given user's News Feed. The figure was largely unchanged from the previous quarter, forcing Facebook to clarify its stance on the number of ads it shows.

The firm's chief financial officer David Ebersman said that the number of ads was balanced with user experience, and that Facebook would increase the number of ads shown as user engagement increases. "Obviously, if we can drive more engagement that provides more opportunity for us to show more ads," he said.

But Facebook would have to be careful not to drive users away with overzealous advertising tactics. Earlier this year, it fell victim to a class action lawsuit levied against it by a group of users unhappy that their profile pictures were being used as part of advertisements. The case was settled, with Facebook shelling out $20m in compensation.

Elsewhere, Mark Zuckerberg spoke of his drive to get internet access to the world as part of his campaign.

"By working together on technology and new business models, we think we can help accelerate the process of connecting everyone," he said. "We believe we are in a unique place to help encourage broader growth of the internet, because so much of what people do on the internet is Facebook."

Earlier in October, Facebook bought data compression startup Onavo to help with its campaign, with the intention of turning Facebook into a more lightweight platform for users without stable mobile data connections.

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Michael Passingham

Michael Passingham joined V3 as a reporter in June 2013. Prior to working at V3, Michael spent time at computing magazine PC Pro. Michael covers IT skills, social media, tech startups and also produces V3's video content.

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