UPDATED: 6:45 p.m. ET
During a fourth quarter earning call
describing generally better than expected results, Facebook executives stressed
the progress they'd made in expanding their new product, particularly those in
the mobile area, and the effectiveness of their advertising products.
At
the start of the call Facebook chairman and CEO Mark Zuckerberg, noted that
active daily mobile users now exceed those from the desktop computer platform.
He also acknowledged that responding to the move to mobile had been "a
challenge" for the company because it started the year with "apps that weren't
as high quality as we wanted and no ads in our apps at all."
Addressing
those problems was particularly important for Facebook. Its stock had slumped
dramatically following its IPO last year over concerns that it would continue
to rapidly grow revenue, falling from $38 to under $20 a share.
Better than Expected Results
The
2012 results showed major progress in addressing those concerns, with full year
revenue jumping from $3.71 billion in 2011 to $5.09 billion. Non GAAP net also
rose from $1.16 billion to $1.32 billion while GAAP net income fell from 1.00
billion to $53 million, thanks to increased investments.
Facebook
COO Sheryl Sandberg spent considerable time
discussing various examples of the effectiveness of advertising on Facebook and
reported that the company's ad revenue jumped 41% in the 4th quarter.
Very
importantly, Facebook reported significant progress in its attempts to expand
mobile revenues, which boosted overall fourth quarter 2012 revenue to $1.56
billion and non-GAAP income to about $736 million or $0.17 a share. GAAP net
income was $64 million or about $0.03 a share.
Wall
Street had been expecting revenue of around $1.51 billion according to the Wall
Street Journal and non GAAP earnings of around $0.15 cents and GAPP earnings of
$0.03.
Still
the stock declined in afterhours trading, however, by about 4.29% to $29.90 at 6 p.m. ET, reflecting the hefty investments the company
plans to make in 2013 to continue to grow its advertising and mobile business.
Progress onMobile
During
the call, Facebook executives highlighted the major shift that users are making
to mobile device. They noted that the number of monthly active mobile users
grew 57% between the end of 2011 and 2012, when they hit 680 million, making
them a significant portion of the company's 1.06 billion active users.
Mobile
daily active users also exceeded web daily active users for the first time in
the fourth quarter, Zuckerberg reported. He also noted that Facebook is now 23%
of all time spent on apps in the U.S. and next biggest was
Instagram with 3%, according to comScore.
"If
you put them together we are now more than one quarter of the time spent in
apps," Zuckerberg noted. "Today there is no argument. Facebook is a mobile
company."
Facebook
did report that mobile revenue now accounts for 23% of its ad revenue in the
fourth quarter, up from 14% in the third quarter.
Costs Continue to Rise
Fourth
quarter costs and expenses hit $1.06 billion, up 82% from a year earlier. This
reduced GAAP operating margins to 33%.
Brian
Wieser, senior research analyst at Pivotal Research Group noted in a report
following the earnings release that "mobile advertising is more expensive to
service than is desktop online advertising," and that "contributed to
significantly higher costs and expenses."
Zuckerberg
note that those costs of developing new products are likely to continue to
rise, noting that the company had "made the decision to quickly grow headcount"
and that they expect expenses to grow faster than revenue.
In
2012, the number of employees hit 4,619, up from 3,200 in 2011 and 1,218 in
2009. The increase in employees had been driven by hiring in tech groups, noted
CFO David Ebersman.
He
added that "2013 will be a year for investment" where expenses are likely to
grow by 50%.
