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July 26, 2012

Newly Public Facebook Releases First Q2 Financials with Focus on Mobility

By Amanda Ciccatelli, TMCnet Web Editor

After an unstable initial public offering two months ago, Facebook (News - Alert) took the stage today reporting its first earnings results as a public company. The release of its quarterly financial results is Facebook’s chance to prove to investors it can continue generating revenue from advertisements on its website and mobile application.

To do that, the world’s largest online social network must keep its one billion users logging on as often, and for as long as possible, interacting with each other and with brands.

"Our goal is to help every person stay connected and every product they use be a great social experience," said Mark Zuckerberg, Facebook founder and CEO. "That's why we're so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends."

Facebook makes the most of its money from advertising. Since people share so much about themselves on the social network, Facebook tries to offer highly targeted ads that people are likely to be interested in. The company also uses individuals’ personal relationships to target advertisements, assuming they’ll will be more interested in products that their friends like.

"We're beginning to demonstrate that we can advertise effectively within mobile,” said Zuckerberg.

Created by Zuckerberg in a Harvard dorm in 2004, Facebook has taken a critical step in its growth into a multi-national company as it went public on May 18. After months of hoopla, Facebook’s stock landed with a thud, its debut marred by NASDAQ glitches that delayed trading.

The Washington Post reported that company-watchers will be scrutinizing the way in which it conducts its first public financial release.  Stifel Nicolaus (News - Alert) analyst Jordan Rohan told Yahoo the report is "not likely to inspire." To do that, Facebook will need to show revenue growth above 30 percent, according to the analyst who expects revenue to rise 28 percent, to $1.14 billion.

Wednesday's disappointing second-quarter report from Zynga Inc., whose games are played primarily on Facebook's website, does not bode well for Facebook. Zynga directly accounted for a significant portion of Facebook's revenue — about 11 percent in the first quarter.

"We have already seen how social dynamics can transform industries like gaming,” said Zuckerberg.

Facebook shares fell $2.05, or 7 percent, to $27.29 in premarket trading Thursday. So analysts are expecting Facebook to post earnings of 12 cents per share on revenue of $1.16 billion, according to a poll by FactSet (News - Alert).

It was reported that revenue for the second quarter totaled $1.18 billion – an increase of 32 percent – compared with $895 million in the second quarter of 2011. Revenue from advertising was $992 million, representing 84 percent of total revenue and a 28-percent increase from the same quarter last year.

Also, payments and other fees revenue for the second quarter was $192 million.

Besides revenue growth, what Facebook says about user numbers is important. How many people use the site, as well as how often and for how long. The Washington Post reported that Facebook currently has 901 million monthly active users and 526 million daily active users, while each month, 488 million users accessed Facebook using a mobile device.

Facebook reported that its monthly active users (MAU) were 955 million as of June 30, 2012 – an increase of 29 percent year-over-year. Its daily active users (DAU) were 552 million on average for June 2012 – an increase of 32 percent year-over-year.

Its Mobile MAUs were 543 million as of June 30, 2012 – an increase of 67 percent year-over-year.

"Mobile users are 20 percent more likely to use Facebook on any given day,” said Zuckerberg. "We're investing very heavily in improving our mobile apps."

This quarter, Facebook also launched several new mobile products including a new Facebook Camera app for iPhone, an improved version of the mobile messenger app for iOS and Android (News - Alert), updates to the Facebook Android app, and a global App Center.

Apple even announced plans for a deep Facebook integration throughout the next version of Apple's iOS and OSX.

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Edited by Braden Becker
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