4Q EARNINGS CALL: Facebook’s Mobile Ad Revenue Of $1.25B Accounts For 53% Of Total Revenue; Monthly Active Users Now Total 1.23B, 296M Mobile-Only

4Q2013RevenueIf there were any doubts that Facebook is now a mobile company, the social network’s fourth-quarter earnings call Wednesday quashed them all, as mobile ad revenue during the period topped the $1 billion mark for the first time, at $1.25 billion — higher than the company’s total revenue in the fourth quarter of 2012 — and it also accounted for more than one-half of total revenue for the first time, at 53 percent.

Facebook also continued to grow its user base, as the social network now boasts:

  • 1.23 billion monthly active users, up 16 percent compared with the fourth quarter of 2012.
  • 945 million mobile MAUs, up 39 percent from the year-ago period.
  • 296 million mobile-only MAUs, nearly double the total of 157 million in the previous-year period.
  • 757 million daily active users, 22 percent higher than the fourth-quarter-2012 total.
  • 556 million mobile DAUs, up 49 percent from the prior-year quarter.

Total revenue for the company of $2.59 billion was up 63 percent from $1.59 billion in the fourth quarter of 2013, and ad revenue of $2.34 billion rose 76 percent compared with the prior-year period.

Facebook reported fourth-quarter-2013 GAAP (generally accepted accounting principles) net income of $523 million, or $0.20 per share, versus $64 million ($0.03) in the fourth quarter of 2012.

For the full year of 2013, revenue of $7.78 billion was up 55 percent compared with the 2012 total, and GAAP net income of $1.5 billion dwarfed the previous-year figure of $53 million.

Sterne Agee Analysts Arvind Bhatia and Brett Strauser pointed out that Facebook’s fourth-quarter-2013 revenue, adjusted EBITDA (earnings before interest, taxes, debt, and amortization), mobile ad revenue, desktop ad revenue, payments revenue, and total ad revenue exceeded both their firm’s projections and the Wall Street consensus projections, and they boosted their target price for the social network’s tock to $70 per share, writing in a research note:

The fourth quarter of 2013 was the sixth consecutive quarter of revenue and adjusted EBITDA acceleration as reach, engagement, and monetization continued to show improvement. Engagement was strong at 61.8 percent versus 61.3 percent in the September quarter, and this should alleviate concerns surrounding this metric, while strength in ad pricing (up 92 percent year-over-year) should alleviate concerns on the impact of stable (as opposed to growing) ad loads in News Feed. We are raising our target price to $70 per share (from $60).

Instagram monetization and video ads continue to be near- to medium-term catalysts, while Graph Search holds promise longer-term (three to five years).

We are raising our fiscal-year-2014 revenue and adjusted EBITDA estimates by 8 percent and 10 percent, respectively, to $11.1 billion and $6.5 billion, respectively, from $10.3 billion and $5.95 billion. We are raising both our fiscal-year-2015 revenue and adjusted EBITDA estimates by 9 percent, to $14 billion and $8.2 billion, respectively, from $12.8 billion and $7.5 billion, respectively.

Joe McCormack CEO of Adquant, a Facebook Preferred Marketing Developer, offered his insights on Facebook’s fourth-quarter-2013 results:

Many of our customers have been drawn to Facebook’s platform because of its ability to target an audience across multiple devices. Mobile now accounts for one-half of Facebook’s ad revenues, because advertisers are willing to pay a premium for the quality offering that’s available via Facebook’s mobile News Feed. We saw this trend start in the second quarter of 2013, and we expect it to continue well into 2014 and beyond, and Facebook’s results that were announced Wednesday back up our conclusions.

Over 2013, our customers averaged triple-digit ad-spend growth on Facebook. The growth that we saw on our platform is in line with what Facebook announced Wednesday. We think this is attributable to the major improvements Facebook made to its ad platform on a monthly basis over the past year. Additionally, our customers are very excited about Facebook in 2014 and plan on increasing their ad investment in this upcoming year. We think this is the clearest sign yet that Facebook has successfully made the transition since its initial public offering from being in an exploratory phase where it was not yet sure where its revenues would come from, to building a robust business with a quality set of products.

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