Zuckerberg credits improved mobile networks as Facebook profits soar

Image: Facebook

Mobile advertising helped drive soaring profits for Facebook as the company’s third quarter far surpassed analysts’ expectations. And ever-improving mobile networks around the world were a key factor.

The social media giant reported $7.01 billion in revenue and $1.09 earnings per share, outpacing estimates of $6.92 billion and 97 cents. Revenue skyrocketed 56 percent year-over-year to $7 billion, and quarterly profit nearly tripled to $2.38 billion.

The company saw $6.82 billion in ad revenue, roughly 84 percent of which stemmed from mobile.

Data from Standard & Poor’s Capital IQ indicates Facebook’s top-line growth rate is now double that of any other U.S. company with revenues that surpass $20 million, aside from those growing through acquisition, The Wall Street Journal reported.    

Mobile video advertising has become a crucial component of Facebook’s success. And CEO Mark Zuckerberg said recent improvements in mobile networks are paving the way for the company’s success.

“So if you think about what is enabling video to become huge right now, it’s that fundamentally the mobile networks are getting to a point where a large enough (number of) people around the world can have a good experience watching a video,” Zuckerberg said on a conference call discussing the earnings, according to a Seeking Alpha transcript. “If you go back a few years and you tried to load a video in News Feed, it might have to buffer for 30 seconds before you watched it, which wasn’t a good enough experience for that to be the primary way that people shared. But now it loads instantly. You can take a video and upload it without having to take five minutes to do that, so it’s a good experience.”

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Facebook’s advertising business has grown by roughly $1.6 billion over the last two quarters, Jefferies analysts noted, outpacing Google’s growth in ad revenue during the same period. “This suggests FB is the primary beneficiary as new ad dollars pour into mobile ad campaigns,” according to Jefferies.

And the company is pursuing video more aggressively as usage ramps up. The number of people broadcasting live video on Facebook has increased fourfold since May, Jefferies said, and the company is testing a version of its app with a camera “just one swipe away from the news feed,” further integrating video into its offering.

“So there aren’t many companies that can do this at the scale we’re talking about, and this has been a big advantage for us,” Zuckerberg said. “In rolling out things like Live, we’ve had this infrastructure that we’ve been building out for a decade all around the world, and that allowed us to build a product like Live where someone has to stream something live from their phone to potentially hundreds of thousands of people around the world. From a phone, that’s a difficult scaling problem. So we’ve been able to build that up, not just because of the ongoing investment in technology and infrastructure here, but because we’re building on this strong base.”

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Facebook is blazing a trail in mobile video ad revenues that some carriers hope to follow themselves. Verizon has made no secret of its eagerness to cash on in ad revenues with its Go90 offering, and AT&T is preparing to launch DirecTV Now, which will couple advertising with zero-rated content for its customers. One looming question, of course, is whether mobile networks will continue to be able to keep pace with demand as they enter the 5G era.