After a yearlong slump, Facebook finally rebounded above its IPO strike price in August on the heels of strong second quarter earnings. Analysts were expecting another solid showing, with Wall Street predicting Facebook would generate $1.91 billion in revenue and earnings of 18 to 19 cents a share. Instead it delivered $2.02 billion in revenue and earnings of 25 cents a share. The stock is up 8 percent in after-hours trading.
The narrative that has attracted investors to Facebook since last quarter was its growing strength in mobile. Before its IPO, the social network flagged the transition from desktop to mobile as one of its weak areas. It had built its business around the display ads shown next to and eventually in the news feed. Mobile was largely uncharted territory, and that's where its users were headed.
But last quarter Facebook said 41 percent of its revenue came from mobile, up from 31 percent the quarter before. "We’ve made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile," CEO Mark Zuckerberg said in a statement. "The work we’ve done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future." This quarter that number grew to 49 percent.
Last quarter Facebook's daily active users, another important benchmark for the social network's health, was up 27 percent to 699 million. This quarter that number reached 728 million and 1.19 billion monthly active users. That compares to just 230 million active monthly users for its soon-to-be public rival, Twitter.
Investors will be listening closely on the earnings call for clues about how two very important new products from Facebook — video and Instagram ads — will work when they launch in the next few weeks. We'll be updating live during the call.
On the earnings call Sheryl Sandberg says Facebook and Instagram account for one out of every five minutes Americans spend on the mobile web. This represents a bigger share of people's time than YouTube, Twitter, Tumblr, Snapchat, LinkedIn, AOL and Yahoo combined, Sandberg claims.
When asked about video ads Zuckerberg replied that Instagram has taught the company people don't mind clips that autoplay. Hard to imagine users would feel the same way about Instagram video ads.