Facebook‘s net income and revenue grew in the first quarter of the year, helped by an increase in mobile ad revenue, a figure that some skeptical investors have been watching closely.
Facebook said Wednesday that its net income was $219 million in the January/March period. That’s up from $205 million in the same period a year ago when the company was still private.
Revenue grew 38% to $1.46 billion from $1.06 billion, surpassing analysts’ expectations of $1.44 billion.
Menlo Park, Calif.-based Facebook said mobile advertising revenue was 30% of its total ad revenue, amounting to $375 million. That’s up from 23%, or $306 million, in the fourth quarter.
Investors had been worried about Facebook’s ability to grow mobile revenue since before its initial public offering nearly a year ago. The number of people who access Facebook on smartphones and tablet computers is growing quickly, but Facebook didn’t begin showing ads to mobile users until last year.
Facebook’s mobile expansion impressed Sterne Agee analyst Arvind Bhatia. “They are making the transition to mobile faster than anyone anticipated,” Bhatia said. “It seems like they are delivering.”
Bhatia thinks Facebook will fare even better on mobile devices once Mark Zuckerberg firms up its plan to make money from the growing audience checking into Instagram, a photo-sharing service that the company bought last year for $521 million. The analyst believes Instagram will play a bigger role in Facebook’s business next year.
Wedbush analyst Michael Pachter said the results are likely to quiet skeptics who doubted Facebook’s ability to mine its growing mobile traffic for revenue. He was particularly impressed by the 23% increase in Facebook’s mobile ad revenue, even though the company’s overall ad revenue for the period dipped 6% from the final three months of last year.
“Their mobile business is probably bigger than any mobile business on the planet other than the [wireless telecommunications] carriers and Google,” Pachter said.
Facebook started showing mobile advertisements in early 2012. In the third quarter of last year, the company generated 14%, or $153 million, of its advertising revenue from mobile. In the fourth quarter mobile ads represented to 23%, or $306 million.
Research firm eMarketer says Facebook’s share of the U.S. online advertising market is growing. This year, the company is expected to take a 6.5% share of U.S. online ad spending, up from 5.9% in 2012. Still, that figure is far behind Google’s 41.6%.
On the mobile front, eMarketer expects Facebook to take a 13.2% share of U.S. ad revenue, up from 9.5% in 2012, the first year it made any money from mobile ads. Though Facebook is No. 2, it is far behind Google in U.S. mobile advertising. EMarketer expects the online search leader to take a 54.7% share of U.S. mobile advertising revenue this year.
Facebook’s stock rose 12 cents to $27.55 in after-hours trading. The stock closed down 34 cents on Wednesday, up 3% since the beginning of the year compared with an 11% increase for the Standard & Poor’s 500 index.
