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Mark Zuckerberg

Facebook soars as 'mobile first' company

Jessica Guynn
USA TODAY
Facebook CEO Mark Zuckerberg.

SAN FRANCISCO — 2014 was the year Facebook went mobile.

Determined to follow its users as they shifted their time and attention to smartphones and other portable devices, the giant social network spent the last couple of years focused on being a "mobile first" company.

Now it's being rewarded.

For the seventh straight quarter, Facebook topped Wall Street profit and revenue forecasts as it won even more mobile advertising revenue.

More than two-thirds of Facebook advertising revenue now comes from mobile ads.

Total advertising revenue soared 53% to $3.59 billion in the fourth quarter. Mobile advertising revenue accounted for 69% of that.

For some perspective: The 11-year-old company only began selling mobile ads in 2012, the same year it began publicly trading.

RBC Capital Markets analyst Mark Mahaney calls the rapid growth of Facebook's mobile advertising business "one of the most impressive pivots we have seen in Internet history."

Also showing great promise for Facebook: lucrative video ads.

Facebook says it now has about 3 billion video views a day, 65% of those views are on mobile.

For all its heady growth, Facebook is still a long ways from rivaling Google in the digital advertising market.

In 2014, Facebook had an almost 8% share of the market. Google had 31%, according to research firm eMarketer.

"It was a strong quarter which cements our thesis more and more that ad dollars are moving in the direction of online, in particular to social and within that in particular to Facebook," said Sterne Agee analyst Arvind Bhatia.

Facebook reported fourth-quarter revenue of $3.85 billion, an increase of 49% from $2.59 billion in the fourth quarter of 2013. Analysts had expected revenue of $3.77 billion.

Facebook earned $701 million, or 25 cents per share, in the fourth quarter, up from $523 million, or 20 cents per share, in the same period a year ago. Adjusted earnings were 54 cents per share. Analysts had expected 49 cents a share.

FB shares were down about 2% in after-hours trading.

"The early reaction on the part of the markets suggests expectations were above where consensus was. That said, I think the scale of growth paired with the level of margins the company produces is probably unparalleled," said Pivotal Research Group analyst Brian Wieser. "Put the momentum traders aside, this was a very good quarter."

Equally impressive: Facebook's enormous user base continued to grow.

The Menlo Park, Calif., company says it had 1.39 billion monthly active users at the end of the year, up 13% from a year ago. That makes the population of Facebook larger than that of China, the world's most populous country.

Daily users now number 890 million, up 18%. Mobile users rose to 1.2 billion, up 26%.

Also on the rise: spending. Total costs jumped 87% to $2.72 billion in the fourth quarter. Spending on research and development more than doubled.

Facebook spooked investors during its third-quarter earnings call with analysts in October. Chief Financial Officer David Wehner said at the time that expenses could rise as much as 70% in coming quarters.

CEO Mark Zuckerberg has pledged that Facebook will invest aggressively in new areas, some of them experimental. That includes its pricey purchase of virtual reality company Oculus.

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