Last Tuesday witnessed Facebook’s announcement of its earnings for the third quarter. While not exactly impressive, the report showed that the company is still on track despite the many setbacks it encountered after it went public. The networking company revealed a $1.26 billion in revenue, or $0.12 per share, which are slightly higher than estimates of analysts. Its stock price rose after the announcement, hitting 9.2 percent even hours after the trading time. The company closed the day at %19.50 for every share.
Although reported revenue is positive, Facebook has actually lost $59 million during the third quarter.
Before the report was made on Tuesday, analysts had been expecting that Facebook’s estimated revenue for the quarter would be around $1.2 to $1.26 billion, which is slightly higher than the previous quarter at $1.184 billion.
The initial IPO price for every Facebook share was at $45 but that price fell sharply afterwards. On Monday this week, the price was hovering over $19, just hours before the quarterly earnings were announced. Facebook user base has grown dramatically but the overall rate of near-term revenue has never shown any positive trend.
The announcement of one of its biggest partners, Zynga, to layoff workers did not help alleviate the situation at all. Zynga helped Facebook to grow by making casual games for the networking giant including the hit Farmville and Mafia Wars.
Analyst Brian Blau said: “If Zynga was able to keep users playing their games then they would have contributed a bit more revenues, but that’s not the case and its clear that Facebook has the ability to replace that revenue with other partners. Unless Zynga can turn their decline around they will continue to contribute less to Facebook’s bottom line.”
Facebook has been slow in tapping the rapidly-growing mobile market base. The company’s most recent figures reveal that it only earned about $150 million, or 14 percent of the total earnings, from users of mobiles. Sixty percent of users of Facebook are accessing the service using a mobile while less than 20 percent of total number of users spent 20 minutes on the site.
Facebook may be the easy target here on making money from mobile users, but the same trend is true across the industry. Last week, Google sent feelers that it too, is doing poorly in monetizing mobile market by releasing a disappointing earnings figures, blamed principally to its acquisition of Motorola. But many experts are wondering if Google’s poor performance is saying something more.
“Ads on mobile are important to [Facebook and Google, and] weakness in ad rates for mobile is an industry problem—so is effectiveness of the mobile ads, which tend to be less interactive and less engaging—and Facebook also faces those same challenges,” Blau added on his interview with Ars.
“Given this is only Facebook’s second earnings release and their mobile ad products are relatively young, we are still learning more about their business versus Google.”
A report by TBG Digital, an online advertising company based in the UK, showed that click-through rates in Facebook by Americans jumped by 99 percent, while the cost-per click rates (the cost a company pays to get a user to click on ad) have significantly decreased to the lowest level in two years.
TBG added that many online advertisers do not find the situation amusing at all as few people click online ads to begin with. TBG estimated that Facebook users are only doing about 1.468 CTRs, which means that it takes 100 ads displays before two clicks can be achieved.