By Deepa Seetharaman
Facebook Inc. posted a 39% rise in second-quarter revenue, a
fresh sign that deep-pocketed big brands are spending more to
advertise across the social network.
But expenses grew even faster, rocketing up 82%, helping send
the company's shares down 2.2% after hours.
The Menlo Park, Calif.-based company reported revenue of $4.04
billion for the three-month period ended June 30, up from $2.91
billion a year earlier. Analysts polled by Thomson Reuters had
expected Facebook to book revenue of nearly $4 billion.
But Facebook's profit declined 9.1% to $719 million, or 25 cents
a share, compared with $791 million, or 30 cents a share, a year
earlier.
Excluding certain expenses, Facebook said it would have earned
50 cents a share. Analysts had projected earnings of 47 cents on
that basis.
Facebook said in April that costs and expenses would rise as
much as 65% this year as it invests in data centers, new hires and
other long-term initiatives including virtual reality and
solar-powered drones. During the second quarter, expenses rose 82%
to $2.77 billion.
Expectations were high ahead of Facebook's second-quarter
earnings. On July 20, the 11-year-old company's market value
surpassed that of General Electric Co. for the first time. Facebook
shares have risen 24% so far this year, far outpacing the 7.9% rise
in the Nasdaq Composite Index.
Facebook said the number of users who check their account at
least once a month grew to 1.49 billion, up from 1.44 billion as of
March 31. Of those, Facebook said 968 million check in daily, up
from 936 million in the first quarter.
The more-than-$1 billion jump in Facebook's quarterly revenue
partly reflects the fact that larger companies are spending more to
capture an audience that spends a large chunk of time on Facebook.
Facebook and its other mobile apps account for anywhere between
one-fifth and one-third what consumers spend on mobile devices,
according to analyst estimates.
During the quarter, Facebook made two big moves aimed at
courting large advertisers. It beefed up the ad capabilities of
Instagram, the photo-sharing mobile app it bought in 2012 for $1
billion, with new ad formats and targeting options. Many of
Instagram's users are in the under-35 demographic coveted by
advertisers. Facebook also said it would start sharing ad revenue
with video creators in a bid to attract more high-quality videos to
the social network and grab a piece of advertisers' television
budgets.
Analysts expect Facebook will be able to rely more heavily on
video ads amid competition in mobile advertising from Google Inc.,
Twitter Inc., Yahoo Inc., Chinese e-commerce giant Alibaba Group
Holding Ltd. and others.
Much of the increased spending is expected to come as
advertisers shift budgets from television to online. It remains an
open question how quickly companies are making this change, and
some analysts say it hasn't happened yet.
Facebook said mobile advertising represented about 76% of
advertising revenue, compared with 73% in the first quarter and 62%
in the year-ago second quarter. Market researcher eMarketer
estimates that Facebook will capture 16% of the $69 billion
mobile-ad market this year, second only to Google's 35%.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com
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