SOCIAL NETWORK Facebook reported a 40 percent jump in revenues for its first quarter of 2013 to $1.4bn, but saw profits stagnate at $219m.
Facebook's botched initial public offering last year added pressure on the firm to show it can generate revenue from its users' personal data to drive the stock price. The firm's first quarter 2013 financials show an impressive 40 percent jump in revenue to $1.4bn but the company has been unable to translate higher revenues to profits, which barely rose from the same period in 2012, coming in at $219m.
Facebook was happy to tout increased daily and monthly user figures but perhaps one figure will worry investors the most, the firm's claim that it has 751 million mobile users, a 54 percent increase from the same period last year. Facebook is known to have a difficult time making money on mobile users and given its falling margins, the firm will have to work hard to reverse the trend, showing it can monetise what is clearly a fast growing and significant chunk of its users.
Facebook CEO Mark Zuckerberg made a concise but less than inspiring comment on the results, saying, "We've made a lot of progress in the first few months of the year. We have seen strong growth and engagement across our community and launched several exciting products."
While Zuckerberg didn't mention anything about the growing gap between revenue and profits, Eden Zoller, principal analyst at Ovum said, "Facebook's ability to monetise mobile is more critical than ever."
Zoller added, "Facebook's continued investment in product innovation continues to take its toll on margins, which puts new initiatives under intense scrutiny and Facebook's updates on this front were mixed if not muted in some quarters. [...] But Facebook was less reassuring on other key service developments and acquisitions. Graph Search was barely mentioned, despite being flagged at launch as a central pillar for future growth."
There is no denying that Facebook's revenue figures are impressive, but the firm needs to show it can improve profits, otherwise doubts about its ability to make money from its mobile users will persist. µ
Tags: Social Media
Sign up for INQbot – a weekly roundup of the best from the INQ