FACEBOOK last night dispelled fears that it is struggling to make the transition from desktop to smartphone, as its results smashed expectations thanks to strong demand for mobile advertising.
Shares in the social network jumped more than 20 per cent to a year high in after-hours trading as revenue hit $1.8bn (£1.17bn) in the second quarter.
Investors were especially delighted to see 41 per cent of advertising revenue now comes from mobile devices, up from less than a third just three months ago. Analysts had feared that Facebook would struggle to turn a profit from its smartphone and tablet services, which have become increasingly popular but were traditionally less attractive to advertisers.
The company also said customer engagement is increasing, with around 700m of its 1.15bn users checking the social network on a daily basis, compared with 665m in March.
“The company is successfully making the transition to mobile and new ad formats are working really well. Facebook’s ad exchange works really well,” said Sterne Agee analyst Arvind Bhatia. “Engagement is fairly strong still, so it doesn’t sound like anyone is really being turned off by these extra ads.”
There remains concerns that teenagers are abandoning the site – which is nearly a decade old – in favour of upstart messaging services like WhatsApp and Snapchat.
Nonetheless, total revenues were up 53 per cent, producing profits of $333m (£217m) in the three months from April to July.
Facebook has concentrated on improving its services to advertisers in recent months by providing them with better information for targeting consumers. As a result it has wooed back some major clients and encouraged small businesses to use the service, pushing the total number of active Facebook advertisers past 1m.
“We’ve made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile,” said Mark Zuckerberg, Facebook founder and chief executive. “The work we’ve done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future.”
The social network has had a choppy existence as a listed company. Last May it went public at $38 a share, only for investors to watch as the price halved over the following three months. Since then it has recovered ground and last night shares were trading after-close above $30 for the first time since last July, having earlier closed at $26.51.