By Deepa Seetharaman 

Facebook Inc. reinforced its standing as a mobile-advertising powerhouse, nearly tripling its quarterly profit at a time when its Silicon Valley rivals are underperforming.

The social network on Wednesday said advertising revenue jumped 57% in the first quarter to $5.2 billion from $3.3 billion. Mobile ads, which command a higher price than those shown on desktops, accounted for roughly four-fifths of that revenue.

"Businesses are no longer asking if they should market on mobile, they're asking how," Chief Operating Officer Sheryl Sandberg said in an interview. "This is a shift that we think we're very well-positioned to take advantage of and build on."

Facebook's user ranks grew to 1.65 billion from 1.44 billion in the first quarter last year. The company derived more revenue from each of them -- an average of $3.32, compared with $2.50 a year earlier.

The stronger than expected results drove Facebook shares up 8.8% in after-hours trading, lifting the company's market valuation above $330 billion.

Facebook also said its board had proposed creating a new class of nonvoting shares, designed to further cement founder and Chief Executive Mark Zuckerberg's control over the company. The new Class C shares would have the same economic rights as other shares but wouldn't have voting rights, allowing Facebook to distribute them to employees and through acquisitions without diluting Mr. Zuckerberg's control. Google -- now Alphabet Inc. -- made a similar move in 2014.

Facebook's results bucked a trend of disappointing results from other tech companies. Tuesday, Apple Inc. reported its first quarterly drop in revenue in 13 years, while Twitter Inc.'s first-quarter revenue fell short of expectations. Alphabet missed analysts' expectations last week.

The results offered further evidence that Facebook is gaining traction with advertisers at a time when many are shifting funds from their print and television budgets to digital offerings. Ad companies, including Interpublic Group's Magna Global, project digital media will surpass television as the world's largest advertising medium as soon as next year.

Facebook is expected to garner about 12% of the $186.8 billion global digital-advertising market this year, up from 10.7% last year and 8.6% in 2014, according to data firm eMarketer. By contrast, Google's share is projected to decline to 31% from 33% in 2015 and 35% two years ago.

Ms. Sandberg said Facebook's revenue growth was "broad-based" but highlighted video ads as a strong spot. Not all video ad revenue is "incremental" because such ads take the place of others in the Facebook news feed, she added.

For the quarter, Facebook reported net profit of $1.51 billion, or 52 cents a share -- almost triple the $512 million, or 18 cents a share, it earned in the same period a year earlier.

Excluding certain expenses, the company said it would have earned 77 cents a share, up from 42 cents a year earlier. Analysts polled by Thomson Reuters were expecting 62 cents a share on that basis.

Revenue rose 52% to $5.38 billion from $3.54 billion. Analysts expected revenue of $5.26 billion.

Facebook said average ad prices increased 5% in the first quarter, as advertisers bought more mobile ads. Marketing-technology company Kenshoo said mobile ads cost about $4.39 per 1,000 impressions in the first quarter, more than double the $2.17 cost on desktop.

Over the past year, Facebook has launched several new ad types, such as dynamic product ads, which allow users to scroll through items in a company's product catalog. It also made it easier for companies to buy ads on its Instagram image-sharing network; those ads are inserted in users' feeds. In a note, Piper Jaffray analyst Gene Munster said Instagram ads accounted for the increased share of revenue on mobile devices.

The company is "definitely" showing more ads to users compared with a few years ago, Chief Financial Officer David Wehner told investors on a conference call, without sharing a specific figure. Mr. Wehner said Facebook's ability to target ads allowed the company to show more ads without frustrating users.

Video ads gained momentum as well. Facebook has been vying for a piece of television ad budgets by promoting high-quality video content in its news feed. Video ads on Facebook cost about $4 per 1,000 views during the first quarter, up from $3.44 a year ago and higher than the $3.14 average across Facebook, according to data analyzed by Kenshoo.

Mr. Wehner offered a cautionary note on the conference call, warning that growth rates may slow later in the year. "We expect that the main drivers of advertising revenue growth will continue throughout 2016, but we will face tougher comparable as the year progresses given the accelerating ad revenue growth we experienced throughout 2015," he said.

Facebook's spending on capital projects, including new data centers in Texas and Ireland, more than doubled, to $1.1 billion in the quarter. Mr. Wehner said capital expenditures this year will be "at the high end" of Facebook's projected $4 billion to $4.5 billion range.

Executives also faced questions about the way people use the social network. Facebook has been trying to encourage users to share more personal content, with news feed prompts and tools to help users create content, such as a potential camera app under development. Mr. Zuckerberg said overall sharing as well as sharing per user was up across Facebook and its suite of apps, but the way users are sharing has changed. Some of that stems from users' shift to mobile phones from desktops, he said. For example, people tend to share more videos from their mobile devices.

Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com

Corrections & Amplifications: An earlier version of this article incorrectly stated Sheryl Sandberg's compensation. The value of her total pay rose 20% to $18.7 million, not billion.

 

(END) Dow Jones Newswires

April 28, 2016 02:47 ET (06:47 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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