Facebook masters mobile, carrying company to record earnings

Three years ago, mobile was one of its greatest risks, today Facebook's got this figured out

Facebook's efforts to figure out how users want to connect when they're on the move is paying off.

According to the social network's latest earnings report released Wednesday, mobile is carrying the company, pushing it to record fourth-quarter results.

It's an impressive pivot for Facebook, which a few years ago struggled to figure out its mobile strategy and listed it as its biggest challenge. In 2012, when Facebook co-founder and CEO Mark Zuckerberg was trying to sell potential investors on his company prior to its IPO, he had to admit they hadn't figured out a way to monetize mobile. In an amended filing with the U.S. Securities and Exchange Commission, the company even said mobility was one of Facebook’s biggest risk factors.

Fast forward three-and-a-half years and Facebook has not only figured out mobile, its mobile ad revenue accounted for 80% of its fourth-quarter total ad revenue compared with 69% in the same time period a year earlier.

Facebook also reported that overall sales in the fourth quarter jumped 52% year-over-year to $5.84 billion. Profit also increased, going from $701 million a year ago to $1.56 billion in the last quarter.

The company's financial results outpaced Wall Street's expectations of $5.37 billion in revenue and $1.2 billion in profit, for the fourth quarter.

"Well, Facebook is not making any mistakes with mobile," said Ezra Gottheil, an analyst with Technology Business Research. "It has a superb mobile app design and superb back-end technology. It's simple and it works. Connecting with friends is a basic human need for most people, and Facebook is the obvious way to do it."

Brian Blau, an analyst with Gartner, noted that Facebook has done well figuring out its advertising solutions and its mobile efforts have connected perfectly with them.

"The core of the Facebook user base is inherently mobile in nature, and Facebook has responded by offering a great app that people find very useful," Blau said. "Their focus on features and functions that allow for mobility has enabled their user base to easily transition from desktop to mobile use."

Blau also said the company is smart to continually make small adjustments to its app.

"Facebook has done well with a sustained focus on making their mobile experience a priority," he said. "They have tuned their mobile apps to not only provide great interaction, but they also understand that the app has to meet user needs. Listening to users, responding quickly with fixes and solutions, and their constant improvements all go toward creating a superior mobile app experience that users keep coming back to."

Part of what makes Facebook's efforts stand out is that the company manages to update its app without ticking off its users. That's not easy when designers have so little real estate to work with, and users are demanding more functionality.

"They are generating revenue without [angering] users," said Rob Enderle, an analyst with the Enderle Group. "This is very difficult on small screens. And Facebook, in an impressively short period of time, has gone from clueless on mobile to what is likely the best example of how to do this right, based on their financial results."

Gottheil said to continue to succeed with mobile, Facebook needs to focus on keeping its app simple, straightforward and fast, while paying attention to user privacy and complaints.

Company executives also need to keep an eye on Google, Enderle said.

"Right now [Facebook is] likely scaring the heck out of Google," he said. "They need to anticipate a Google response and consolidate their control over advertisers so Google can't make a competitive move and take back the value Facebook has fought so hard to create."

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