[h=3]By Jon Swartz and Matt Krantz, USA TODAY[/h]Updated
SAN FRANCISCO – Facebook gave investors a reason to exhale today, with financial results that narrowly beat forecasts.
Facebook released its first earnings report as a public company Thursday.
The social-networking giant, which went public in May with an eye-poppingly high valuation, reported a non-GAAP profit of $295 million (12 cents a share) on revenue of $1.18 billion for its second fiscal quarter. It's the first quarterly report for Facebook.
Facebook was expected to report net income of $293 million, or 12 cents per share excluding options expenses, on revenue of $1.15 billion, according to the survey of estimates from Thomson Reuters.
Facebook shares are up 6% in after-hours trading.
It's unusual for a company to miss estimates on its first quarter as a public company, says Jay Ritter, professor of finance at the University of Florida. When companies go public, they typically have a solid outlook at least for the first few months.
The stakes could not be higher for social-networking giant after its much-anticipated initial public offering in May fizzled amid questions about its online and mobile advertising business. Its initial valuation of $100 billion is now $60 billion.
"They have to show they can justify" even that lower valuation, says Lucy Jacobs, chief operating officer of Spruce Media, a technology platform for social-media advertising. She said Facebook has made several changes to goose ad revenue.
Like nearly every business in social media and beyond, Facebook is betting a large portion of its future on mobile ads. Yet few companies, including Facebook, have been able to capitalize on the promise. The popularity of mobile devices comes, in part, from their lack of ads.
The market for the ads that dot smartphone and tablet screens is expected to soar to $10.8 billion in U.S. sales by 2016, from an estimated $2.6 billion this year, says research firm eMarketer. That's a tiny slice of the $169.5 billion market for media ad spending in the U.S.
Google has the early lead in the U.S. in monetizing mobile, with 51% of the market, largely due to its success with mobile search ads, says Noah Elkin, an eMarketer analyst. Phone numbers embedded in mobile ads on Google's click-to-call feature, for example, generate about 15 million calls per month.
Facebook barely registers yet, though the company has the potential to rake in $2.54 billion from mobile advertising, according to researcher Chitika. Facebook Sponsored Stories — an ad form that appears on a member's Facebook page and generally consists of a friend's name, profile picture and an advertiser the person "likes" — now appear in a user's Facebook mobile news feed.
"Everything is moving toward mobile," says Debra Williamson, an analyst at eMarketer. "Gaining revenue from mobile and improving that experience are two things that Facebook absolutely has to focus on in coming years."
Until early this year, Facebook had no real mobile strategy, she says.
The company's challenges don't end there.
In the U.S., where Facebook makes most of its advertising revenue, the social network is not drawing new users. In May, 158.01 million unique visitors logged on to the network, compared with 158.69 million in April, according to market researcher comScore. Facebook says it has more than 900 million members worldwide.
Underwriters of Facebook's IPO lowered guidance in May, suggesting the company would earn about $4.8 billion for 2012 — a billion-dollar drop in confidence that fed market uncertainty about the effectiveness of Facebook's advertising machine.
Social-gaming leader Zynga's woeful results on Wednesday — it lost $22.8 million in its most recent quarter — underscored Facebook anxiety, since Facebook depends on Zynga for about 12% of revenue.
Zynga CEO Mark Pincus blamed some of its problems on changes Facebook made to its platform.
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SAN FRANCISCO – Facebook gave investors a reason to exhale today, with financial results that narrowly beat forecasts.
KAREN BLEIER, AFP/Getty Images
Facebook released its first earnings report as a public company Thursday.
Facebook released its first earnings report as a public company Thursday.
The social-networking giant, which went public in May with an eye-poppingly high valuation, reported a non-GAAP profit of $295 million (12 cents a share) on revenue of $1.18 billion for its second fiscal quarter. It's the first quarterly report for Facebook.
Facebook was expected to report net income of $293 million, or 12 cents per share excluding options expenses, on revenue of $1.15 billion, according to the survey of estimates from Thomson Reuters.
Facebook shares are up 6% in after-hours trading.
It's unusual for a company to miss estimates on its first quarter as a public company, says Jay Ritter, professor of finance at the University of Florida. When companies go public, they typically have a solid outlook at least for the first few months.
The stakes could not be higher for social-networking giant after its much-anticipated initial public offering in May fizzled amid questions about its online and mobile advertising business. Its initial valuation of $100 billion is now $60 billion.
"They have to show they can justify" even that lower valuation, says Lucy Jacobs, chief operating officer of Spruce Media, a technology platform for social-media advertising. She said Facebook has made several changes to goose ad revenue.
Like nearly every business in social media and beyond, Facebook is betting a large portion of its future on mobile ads. Yet few companies, including Facebook, have been able to capitalize on the promise. The popularity of mobile devices comes, in part, from their lack of ads.
The market for the ads that dot smartphone and tablet screens is expected to soar to $10.8 billion in U.S. sales by 2016, from an estimated $2.6 billion this year, says research firm eMarketer. That's a tiny slice of the $169.5 billion market for media ad spending in the U.S.
Google has the early lead in the U.S. in monetizing mobile, with 51% of the market, largely due to its success with mobile search ads, says Noah Elkin, an eMarketer analyst. Phone numbers embedded in mobile ads on Google's click-to-call feature, for example, generate about 15 million calls per month.
Facebook barely registers yet, though the company has the potential to rake in $2.54 billion from mobile advertising, according to researcher Chitika. Facebook Sponsored Stories — an ad form that appears on a member's Facebook page and generally consists of a friend's name, profile picture and an advertiser the person "likes" — now appear in a user's Facebook mobile news feed.
"Everything is moving toward mobile," says Debra Williamson, an analyst at eMarketer. "Gaining revenue from mobile and improving that experience are two things that Facebook absolutely has to focus on in coming years."
Until early this year, Facebook had no real mobile strategy, she says.
The company's challenges don't end there.
In the U.S., where Facebook makes most of its advertising revenue, the social network is not drawing new users. In May, 158.01 million unique visitors logged on to the network, compared with 158.69 million in April, according to market researcher comScore. Facebook says it has more than 900 million members worldwide.
Underwriters of Facebook's IPO lowered guidance in May, suggesting the company would earn about $4.8 billion for 2012 — a billion-dollar drop in confidence that fed market uncertainty about the effectiveness of Facebook's advertising machine.
Social-gaming leader Zynga's woeful results on Wednesday — it lost $22.8 million in its most recent quarter — underscored Facebook anxiety, since Facebook depends on Zynga for about 12% of revenue.
Zynga CEO Mark Pincus blamed some of its problems on changes Facebook made to its platform.
For more information about reprints & permissions, visit our FAQ's. To report corrections and clarifications, contact Standards Editor Brent Jones. For publication consideration in the newspaper, send comments to [email protected]. Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.
USA TODAY is now using Facebook Comments on our stories and blog posts to provide an enhanced user experience. To post a comment, log into Facebook and then "Add" your comment. To report spam or abuse, click the "X" in the upper right corner of the comment box. To find out more, read the FAQ and Conversation Guidelines.