All those ads you see on Facebook when you whip out your phone to creep on your friends' profiles are paying off big for the social network. Like, "billions of dollars" kind of big.
Facebook's second-quarter earnings handily beat analysts' expectations, to the tune of 19 cents per share versus predictions of 14 cents a share, and 41 percent of its $1.6 billion ad revenue came from mobile. Analysts had expected mobile to account for just 33 percent of Facebook's total ad revenue, which jumped 61 percent over the second quarter of 2012 (just after Facebook went public and the pressure was on the social network to prove its worth). In the first quarter of 2012, Facebook had zero mobile revenue, which makes these numbers even more notable.
It helps that Facebook has a huge user base eyeballing those mobile ads. The company reported on Wednesday that mobile daily active users have reached 469 million, while mobile monthly active users hit 819 million, a 51 percent jump over last June. For perspective, Facebook's monthly active users across platforms now total 1.15 billion.
Making ads matter
Facebook CEO Mark Zuckerberg in Wednesday's earnings conference call said the network is paying close attention to how users react to mobile ads. Right now, some 1 million brands actively advertise in Facebook's News Feed and make up about 5 percent of posts users see in their feeds.
"We haven't measured a meaningful drop in satisfaction," Zuckerberg said, but noted that users are noticing ads more.
"We're going to invest more in improving the quality," he added.
Major brands are using Facebook to reach their target markets, but Facebook is also reaching out to local businesses to help them draw new customers. Facebook COO Sheryl Sandberg said one San Francisco photo business had to put their Facebook ad campaign on hold after orders surpassed the company's production rate.
This all sounds like good news for Facebook, which has struggled to convince its shareholders and Wall Street that it can make money off its hundreds of millions of users. Its stock prices have dwindled since the company's IPO, and reports indicated that teens--a highly coveted market for social networks--were shunning Facebook and turning to Twitter and Tumblr.
Zuckerberg said those reports were greatly exaggerated--the company has seen zero evidence of declining usage among teens--and stock prices are surging upward.
"Graph Search and Home are completely new kinds of products and they're just going to take longer to develop," he said.
Instagram video, which Facebook introduced in the second quarter, has been more successful than Graph Search and Home because Instagram had an already devoted user base.
Instagram: Future moneymaker?
Instagram had no impact on Facebook's earnings, but still generated a huge amount of interest. Five million videos were uploaded to Instagram in the service's first 24 hours.
Instagram makes no money at the moment, but expect Facebook's push for mobile ads to eventually affect the photo-sharing app.
"We expect that over time we're going to generate a lot of profit from it, probably through advertising," Zuckerberg said during the earnings call. "There are so many directions to expand this in, that we think that's the right direction to go in for now. When the right time comes, we'll think about doing advertising as well."
Enjoy ad-free Instagram while you still can.