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Facebook in the zone: 5 things it’s doing right

Sharon Gaudin | April 29, 2016
Facebook reports that it’s killing it with revenue, users and mobile

After all the news that came out of Facebook's earnings call Wednesday, the social networking giant has hit the zone.

Wall Street was pleasantly surprised by Facebook's financial results , while the company also had good news to report about user growth, mobile usage and Instagram.

"Facebook is hitting on all cylinders now," said Dan Olds, an analyst with The Gabriel Consulting Group. "Advertising revenue is up an astounding 57 percent year-over-year, with total revenue up 52 percent. Better yet, operating margins improved from 26 percent to 37 percent, leading to 115 percent higher profits at just over $2 billion. Facebook is definitely executing their plan in a big way."

Here are five things you should know that came out of Facebook yesterday.

1. The bottom line is looking up

Facebook reported in its first-quarter earnings call Wednesday that the company went way beyond Wall Street's expectations.

The social network reported revenue for the quarter of $5.38 billion, compared to analysts' expectations of $5.26 billion.

"We're also pleased with our business results," Mark Zuckerberg, Facebook's co-founder and CEO, said during the conference call with analysts. "Total revenue this quarter grew by 52 percent year-on-year to $5.4 billion, and advertising revenue grew by 57 percent to $5.2 billion."

Wall Street analysts were enthused, and the company's stock price jumped to $116.55 a share, up from $108.89 at the previous day's close.

"Every once in a while a company gets into that magical zone. Facebook is in that zone," said Jeff Kagan, an independent industry analyst. "This is the nirvana that every company strives for but very few ever hit. This will not last forever, but it could last for several years."

2. Facebook crushes it with mobile

Facebook also reported that 82 percent of its advertising revenue in the first quarter came from mobile. That's up 73 percent from the first quarter of 2015.

That is a night-and-day difference from how the company had been looking at mobile before Facebook launched its IPO.

Four years ago, in its runup to Facebook's IPO, the company called mobile one of its biggest challenges. In an amended filing with the U.S. Securities and Exchange Commission, Facebook said at the time that it didn't know how to monetize users' move from the desktop to a mobile device.

Now several years later, Facebook is the mobile player that other companies look to for guidance.

"Facebook is killing it in mobile. Why?" asked Olds. "I think it's because their apps, like Instagram and Messenger, are driving huge amounts of traffic for the company and that means big advertising revenue. With their vast number of users, any new application that Faceook brings out is sure to get a fair trial."

 

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