SAN FRANCISCO -- Facebook reached a key milestone in the last quarter when more than half of its advertising revenue came from mobile devices.
Revenue rose 63 percent to $2.59 billion and profit excluding some items was 31 cents a share, the Menlo Park, Calif.-based company said in a statement Wednesday. Analysts on average had projected sales of $2.35 billion and profit of 27 cents, according to estimates compiled by Bloomberg.
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Chief Executive Officer Mark Zuckerberg, who started Facebook a decade ago and turned it into world's largest social network, spent the last year adding more ways for advertisers to reach consumers. Users are spending more time on wireless devices, with mobile promotions generating $1.25 billion in the latest quarter and accounting for 53 percent of ad sales, up from 49 percent in the prior period.
"Mobile is so key for them," said Laurence Balter, an analyst at Oracle Investment Research who has a hold rating on the stock. "It's going to be a big battle between Facebook and Twitter, and it's Facebook's game to lose."
Net income rose more than eightfold to $523 million, or 20 cents a share, from $64 million, or 3 cents, a year earlier.
As marketers shift spending to social-media services, Facebook and Twitter are set to expand their share of the digital-ad market, according to EMarketer Inc. By 2015, Facebook will grab an estimated 9 percent, up from 5.9 percent in 2012, while Twitter may take 2.2 percent, up from 0.6 percent, the researcher said last month. Twitter reports its first earnings as a public company on Feb. 5.
"The investments we've made to improve our mobile products are paying off," David Ebersman, Facebook's chief financial officer, said in an interview. "We still feel like we're really early and very much in investment mode in terms of what we're trying to build here."
Even with more digital-ad spending anticipated, Facebook has been limiting the number of ads shown in a member's main stream of messages, known as the News Feed, to avoid alienating users. That pressures the company to increase the effectiveness of their promotions and charge more for them, according to Robert Peck, an analyst at SunTrust Robinson Humphrey Inc.
Facebook said it would seek to boost the quality, or relevance, of advertisements rather than quantity, which in turn would let the company charge more for promotions. Some of that's already happening, Ebersman said, with the average effective price of ads up 92 percent compared with the prior year.
For many users, Facebook is no longer a shiny new service. The company next week will celebrate 10 years since Chief Executive Officer Mark Zuckerberg founded the social network in a Harvard dorm room. The company had 1.23 billion monthly active users in December, a 16 percent increase from the prior year, with 945 million of them on mobile phones.
Facebook has said that younger teens aren't using its website as much as they used to. The company last year offered $3 billion to acquire Snapchat, an application popular with teens for sending annotated photos that disappear, which the startup turned down, a person familiar with the matter has said.
"If Facebook isn't a teen product, then the teens are using Instagram, which is also owned by Facebook, so I think the fear is a little exaggerated," said Eric Steiman, who owns Facebook in a portfolio of $5.5 million at Covestor. "The number of people on the platform is truly remarkable."
The company said it had "no new data to report" on teen engagement.
Facebook sold $3.85 billion of shares in a secondary offering last month, its first share sale since going public, as the stock more than doubled in 2013. The company also was included in the Standard & Poor's 500 Index, an event that triggered demand from index funds and other institutions to own the stock.