Facebook shares top $100 on bumper fourth quarter

Facebook's share price has risen above $100 in response to better than expected annual and fourth-quarter results for 2015

Facebook’s share price rose 8.7% in after-hours trading to top $100 following the social networking company’s announcement after Nasdaq had closed on 27 January of fourth-quarter profits more than twice the figure reported a year before.

Profit for the three months to December 2015 was $1.56bn, up from $701m in the fourth quarter of 2014, while revenue was a record $5.48bn, up from $3.85bn.

The results beat analysts’ expectations, especially the growth in advertising revenue to $5.6bn for the quarter, which according to exchange-adjusted figures was 57% higher than the fourth quarter of 2014.

Significantly, Facebook reported that mobile advertising accounted for 80% of its advertising revenue for the quarter, up from 69% in Q4 2014.

Mobile advertising is widely seen by investors as a key indicator of Facebook’s market resilience and ability to maintain growth and profitability.

Stephanie Carr, European vice president for Marin Software, said the results prove that Facebook, despite a slowing in its rate of growth, continues to make good use of its engaged user base of over a billion every month on mobile.

“We know from our digital marketing managers census that what Facebook is achieving is not the norm. The annual census reveals that, across the board in the UK, online spending levels are not where they need to be. On average, 25% of all UK media consumption is via mobile devices, yet only 10% of all ad spend goes on mobile,” she said.

Facebook is not alone in realising the importance of mobile, said Carr, but appears to be using it particularly effectively to reach its ever growing user base. “Advertisers looking to enjoy similar success need to make sure that mobile is getting the share of budget it really deserves.”

Facebook revenue for the full year of $17.9bn was 44% higher than the 2014 financial year, while profit was up 25% to $3.69bn.

User growth

Facebook also reported significant growth in users, with the number of monthly active users up 14% to 1.59 billion in the fourth quarter, and the number using mobile devices up 21% to 1.44 billion.

“2015 was a great year for Facebook. Our community continued to grow and our business is thriving,” said Mark Zuckerberg, Facebook founder and CEO. “We continue to invest in better serving our community, building our business, and connecting the world.”

Addressing user growth in an earnings call, Zuckerberg said the increases represented nearly 200 million extra people monthly and 148 million extra people daily over the past year.

He also pointed out that WhatsApp ended 2015 with nearly a billion monthly active users and that over 100 million hours of video are now watched daily on Facebook – mainly thanks to huge autoplay video growth, according to Seeking Alpha.

Analysts said the strength of Facebook’s core business means Zuckerberg is unlikely to encounter any opposition in continuing to pursue investments in virtual reality, artificial intelligence and drone technology, according to the International Business Times.

Sports Stadium

Facebook is also going after sport fans with a newly announced online hub for news and sharing on sporting events called Facebook Sports Stadium. It will offer live updates of scores, posts from friends and commentators, and information on where to watch games live.

Accordng to Antoine de Kermel, European managing director of advertising firm TVTY, Sports Stadium is a “mouth-watering” prospect for advertisers that will build on the existing returns from Facebook over the next quarter.

“These results show yet again Facebook is the champion at monetising social media with advertising, especially when it comes to mobile devices. With more people second-screening on Facebook while watching sport, the announcement of Sports Stadium is the natural next step to monetise this huge potential,” de Kermel said.

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Facebook’s focus on video has clearly paid off, according to Justin Taylor, UK managing director at video advertising firm Teads.

“We know video is leading the charge in terms of delivering premium and respectful ad formats, and this is what is appealing to consumers. With a wealth of data driving its ad platform, it’s no wonder advertisers are still placing their faith and dollars in Facebook’s hands,” he said.

Taylor added that while ad blocking has not been a major concern for Facebook as most of its users log in through its app, this could all change as blocking technology continues to gather pace.

“While these earnings show that users are currently engaging with Facebook’s advertising, it needs to make sure ad dollars don’t trump user experience and it becomes a victim of ‘adblockalypse’,” he said.

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