Facebook Profit Tops $1 Billion

Facebook Inc. on Wednesday posted more than $1 billion in quarterly profit for the first time, showing the social network’s mobile strength as advertisers increasingly look to reach younger users.


Investors drove shares up nearly 13% in after-hours trading, to $106.62, giving the 12-year-old company a market capitalization greater than $300 billion.

Mobile ads accounted for 80% of Facebook’s ad revenue in the fourth quarter; three years ago, mobile-ad revenue accounted for just over 20%.

RBC Capital Markets analyst Mark Mahaney said, “2015 was the year that Facebook went from being an experiment to a must-buy for advertisers.”

For most of past year, Facebook’s spending outpaced its revenue growth, as the company accelerated hiring and invested in projects such as virtual reality, artificial intelligence and delivering Internet access to remote areas.

In the latest quarter, however, that dynamic reversed: Revenue rose 52% to $5.84 billion, from $3.85 billion. Costs, meanwhile, rose 21%.

Advertising revenue jumped 57%. Excluding the effects of the stronger U.S. dollar, Facebook said ad revenue would have increased 66%, marking the fastest quarter of ad revenue growth since the first quarter of 2014, when revenue was less than half as much, Mr. Mahaney said.

Quarterly net income crossed the $1 billion threshold for the first time, roughly 3½ years after Facebook’s 2012 initial public offering. By comparison, Google parent Alphabet Inc. first posted quarterly net income of $1 billion in late 2006, less than 2½ years after its IPO.

Facebook’s net income totaled $1.56 billion, or 54 cents a share, in the fourth quarter, up from $701 million, or 25 cents a share reported a year ago. Excluding certain expenses, Facebook said it would have earned 79 cents a share, up from 54 cents on that basis a year earlier. Analysts had expected earnings of 68 cents a share on that basis.

Behind the investor enthusiasm: Facebook still has many untapped revenue drivers at its disposal, including video, messaging and virtual reality, analysts say. Facebook users watch 100 million hours of video on the social network every day, Chief Executive Mark Zuckerberg said during a conference call with analysts.

The company ramped up efforts to sell ads on its Instagram image-sharing network in the second half of last year.

Facebook “made big strides” on Instagram in the fourth quarter, Chief Financial Officer David Wehner said in an interview.

Ninety-eight of the top 100 Facebook advertisers also advertised on Instagram in the fourth quarter, Chief Operating Officer Sheryl Sandberg said during a conference call with analysts.

“What they’re starting to prove is they can monetize Instagram as well as they have Facebook,” Mr. Mahaney said.

Beyond Instagram, Facebook now generates little revenue from its virtual-reality unit Oculus VR and its two messaging apps, WhatsApp and Facebook Messenger.

“This is all the very beginning, video is barely monetized right now and the other platforms are barely monetized,” said Jan Rezab, founder of Socialbakers, a social-media metrics company. “Video is only at 20% at what it can be.”

Mr. Zuckerberg said Facebook will develop its various properties using the same, well-honed playbook that has benefited the primary Facebook app—internally dubbed “big blue.”

A few years ago, when Facebook saw its users shifting to mobile devices, Mr. Zuckerberg told his product team to prioritize mobile-first products.

“If you come in and you try to show me a desktop product, then I’m going to kick you out,” Mr. Zuckerberg said he told the team at the time. “You have to come in and show me a mobile product.”

Earlier this month, Facebook’s WhatsApp messaging unit said it would scrap its subscription fee and test ways to help businesses to interact with users. Messenger added a similar feature in 2015.

WhatsApp ended the year with nearly one billion monthly active users. Oculus VR plans to start shipping its $599 Rift virtual-reality headset in March.

Average revenue per user rose one-third to $3.73.


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