Better Monetization Eases Market Concerns Over Facebook

Facebook may have recorded the largest Internet player IPO ever. But since going public, the company’s market value has slipped considerably. Facebook has lost more than $40 billion in market value since the IPO as analysts have been worried about its ability to keep up monetization, especially on the mobile front. But the recent quarterly results managed to quell a few market concerns.

Facebook’s Financials
Facebook’s (Nasdaq:FB) Q3 revenues increased 32% over the year to $1.26 billion, ahead of market expectations of $1.23 billion. EPS of $0.12 was also ahead of the Street’s targeted earnings of $0.11 for the period.

By segment, advertising revenues grew 36% over the year to $1.09 billion. Revenues from payment services grew 13% over the year to $0.18 billion.

Facebook’s usage statistics are improving. The company ended the quarter with more than one billion monthly active users worldwide. Within North America, monthly active users grew 7% over the year to 189 million, and Europe saw a 14% increase in the metric to 253 million users. Asian markets saw the biggest expansion, with the user base increasing 41% to 277 million. Monthly users in the rest of the world grew 39% to 288 million. Daily active users also increased 28% over the year to 585 million driven by 44% growth in Asia and 52% growth in users in the rest of the world. Increasing usage is also translating to an improved monetization capability. Facebook’s average revenue per user grew 4.4% over the year to $1.29.

Facebook Improves Mobile Usage
The company also recorded impressive growth in its mobile statistics. The number of monthly active users who accessed Facebook through mobile devices rose 61% over the year to 604 million. That translates to more than 60% of the total user base accessing Facebook through mobile devices. A quarter ago, 57% of users were accessing Facebook through mobile devices.

Facebook began advertising on mobile devices earlier this year and has seen good traction in revenues from these devices. During the last quarter, advertising revenues from mobiles contributed 14% of total advertising revenues, or nearly $150 million. A quarter ago, Facebook recorded $40 million-$50 million in mobile advertising revenues.

To increase ad revenues from the mobile segment, Facebook launched Facebook Exchange. Through Facebook exchange, advertisers can display their ads to specific consumers by bidding in real time for users. Since its launch, advertisers have found that Facebook Exchange to be more efficient  compared with other ad exchanges and delivers more favorable results for advertisers at a lower cost.

New Monetization Models for Facebook
Facebook has been developing newer services to improve monetization opportunities. Last month it relaunched Facebook Gifts, a service that they had offered nearly two years ago. Facebook Gifts lets users send gifts to their friends who are Facebook users in the U.S. Gifts range from cupcakes from New York City’s Magnolia Baker to stuffed animals and digital gift cards. Users pay for these cards through their credit cards. Facebook expects the move to help grow advertising revenues as merchants will be looking to pay for premium placement for their gift merchandise.

Facebook also recently launched a promoted post feature. Currently being tested, the feature lets users promote a post to their friends at a cost of $7 a post. The feature was earlier available for businesses who could sponsor stories. Now, individual users will also be able to promote posts, photos, and events.

The market is reacting positively to Facebook’s improved monetization and mobile opportunities. The stock has recovered from the low of $17.55 it touched last month. It is trading at $23.23 with a market capitalization of $49.77 billion.