Facebook reported a sizable increase in revenue Wednesday, fueled by another big surge in a mobile advertising business that didn’t exist when the social networking giant was preparing to go public one year ago.
Sales of mobile ads — or messages shown to Facebook members on smartphones and tablets — contributed $375 million in revenue, or nearly a third of the company’s total advertising sales in the quarter that ended March 31. That fueled a 38 percent increase in overall revenue, as Facebook reported net income of $219 million on total sales of $1.46 billion.
“It’s a big number, and it’s come up fast,” said financial analyst Martin Pyykkonen of the Wedge Partners investment firm, noting that Facebook was widely criticized for having no mobile advertising as it prepared for its initial public stock offering in May 2012.
Profit for the first quarter of 2013 was slightly below Wall Street analysts’ estimates, while revenue was slightly above.
Facebook began selling mobile ads in the second half of last year, and it’s been working feverishly to expand that business. The company also has developed new services and features aimed at the growing number of Facebook members who use handheld gadgets, including a redesign of the social network’s “News Feed” and a new interface for Android smartphones.
CEO Mark Zuckerberg said Wednesday that Facebook is also developing a host of new advertising products, including “mobile app installs” that encourage smartphone and tablet users to download apps from game developers, banks, travel companies and other businesses that want to reach people online.
Even so, Chief Operating Officer Sheryl Sandberg acknowledged that Facebook is still in the early stages of developing analytical tools to demonstrate the effectiveness of advertising on Facebook, which Pyykkonen and other analysts say is important for potential advertisers to see.
Facebook executives also sidestepped an analyst’s question about anecdotal concerns that members under age 25 may be losing interest in the network as new online services emerge to capture their attention.
“Younger users remain among the most active and engaged users that we have,” said Chief Financial Officer David Ebersman, but he declined to provide a breakdown of users by age.
Facebook recorded 1.1 billion monthly active users in March, after passing the 1 billion mark late last year. About 750 million of those members use the network on smartphones and tablets instead of the desktop or laptop computers that were in vogue when Zuckerberg launched the network in 2004.
In keeping with that trend, Ebersman said sales of desktop ads were flat in the last quarter, while mobile advertising grew.
Zuckerberg told analysts he’s pleased with the company’s progress in recent months, though he also cautioned that some recent initiatives won’t show financial results right away.
Instagram, the popular photo-sharing service that Facebook bought last year, has grown from 20 million active users to more than 100 million, Zuckerberg said. But he told analysts that expanding Instagram’s user base is still “100 percent of the focus” for now, implying that making money from the service is not yet a priority.
Facebook’s new “Home” interface for Android phones, meanwhile, had a rocky start after it was unveiled to great fanfare last month. While it reportedly has been downloaded more than 500,000 times, Home has drawn a relatively low average rating of just two stars out of five in the Google Play online store. Some users have complained that Facebook’s interface made it more difficult for them to access other apps.
Zuckerberg, however, told analysts that he’s proud of the new Home software, while adding that Facebook will keep working to improve its mobile interface. “This is just the first release in a long journey,” he added.
Facebook’s profit was up 7 percent from a year earlier. But its earnings of 9 cents a share, or 12 cents a share excluding one-time charges, were slightly below estimates from analysts who had expected 13 cents a share excluding charges, on revenue of $1.39 billion, according to a survey by Thomson Reuters.
After plunging sharply in the wake of its IPO, Facebook’s stock price started to climb over the winter. Shares peaked at $32.47 in late January, however, and have fallen below $28 in recent weeks. The stock closed Wednesday at $27.43.