Facebook's fourth-quarter profit soars on mobile advertising

Facebook has reported fourth-quarter revenue of $3.8bn and net income of $701m, up 49% and 34% respectively compared with the same period a year ago

Facebook has reported fourth-quarter revenue of $3.8bn and net income of $701m, up by 49% and 34% respectively compared with the same period a year ago.

Revenue from advertising alone was $3.59bn, a 53% increase, with nearly 70% of that revenue coming from mobile ads, up from 53% in the same period the year before.

When the social networking firm went public in 2012, cracking mobile advertising was identified as being key to achieving investor confidence.

Some analysts have attributed Facebook’s success in mobile advertising to the rise of the larger screen smartphone, and Apple’s success in particular with its larger format iPhones.

Facebook revenue for the full year of 2014 was $12.47bn, an increase of 58% year-over-year, while net income for the full year was $2.94bn, an increase of 96% compared with 2013.

Facebook said it has 1.39 billion active users each month, a 13% increase from a year ago. Mobile users increased by 26% compared with 2013 to 1.19 billion monthly active users.

In sustaining growth through key acquisitions, Facebook continues to satisfy one of the key indicators investors look at when it comes to social networking firms.

Facebook CEO and founder Mark Zuckerberg said the firm has got a lot done in 2014, as its community grows and makes progress in connecting the world.

“Our community continued to grow in size and engagement and we’re very pleased with the growth of our business. Overall, 2014 was a year of great progress for the Facebook community,” he said.

Zuckerberg said time spent per person per day across Facebook services continued to rise, growing by more than 10% compared with the previous year.

However, analysts said the amount of profit the company made on each dollar of revenue decreased from 44% to 29% from a year earlier due to investments in research and development (R&D), as well as marketing.

R&D spending nearly tripled to $1.1bn in the fourth quarter of 2014 compared with the previous quarter as the social networking firm developed acquisitions such as Instagram, WhatsApp and Oculus Rift, as well as its own messaging and video services.

R&D spending for 2014 was $2.7bn, up by 88% compared with 2013.

2014 was a year of big investments in the company’s future, said Zuckerberg.

“This year we made big bets on the next generation of communication and computing platforms by acquiring WhatsApp and Oculus,” he said.

Video ads, Instagram and mobile messenger remain Facebook’s attractive road maps, according to analysts.

Addressing mobile messenger challenge

However, one analyst for Seeking Alpha said the WhatsApp user base has reached a critical level, meaning Facebook needs to address its mobile messenger challenge.

“In my view, Facebook Messenger and WhatsApp are two competing platforms that have both lagged behind their Asian rivals in terms of functions and services,” the analyst said.

The analyst believes proper resource allocation is necessary for Facebook to develop a single mobile messenger app that could potentially compete on a global scale.

Despite 2014 being the best year to date for Facebook, other analysts said in the coming year investors will turn their attention to Facebook’s rising costs and diminishing margins.

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