Facebook's (NASDAQ:FB) advertising revenue significantly rose in the second quarter of fiscal year 2016, climbing 63 percent year over year to $6.24 billion. The company’s price per ad added 9 percent in the quarter.
Mobile advertisements continue to be the key driver for Facebook, accounted for 84 percent of total advertising revenue, up from 76 percent during the same period last year.
The social-media giant’s cost moderately increased, allowing it to boost operating margin from 31 percent to 46 percent. On the other hand, net income rose 186 percent to $2 billion for the quarter.
Although the company’s audience has been growing more slowly than revenue, Facebook posted its strongest active user growth in three years. The company reported daily active users of 1.13 billion, indicating a 17 percent year over year increase. Active daily users on Facebook’s mobile platform added 22 percent to 1.03 billion.
In addition, monthly active users jumped 15 percent year over year to 1.7 billion, exceeding forecasts of 1.69 billion. Mobile monthly active users increased 20 percent to 1.57 billion. Mobile daily and monthly active users represents 91 percent of the total user base.
According to Facebook, the time spent boosted double-digit percentages year over year across its platforms. However, it did not disclose the average time spent.
Chief Executive Mark Zuckerberg issued a report that the leading social network was expecting drops in personal sharing.
Overall, the level of sharing is up on Facebook,” Zuckerberg said. “What we are seeing is how people are sharing is evolving as we move from desktop to mobile. You can imagine more photos on mobile cameras, and fewer long full photo albums; that it’s harder to type, but there is a better ability to capture video.
Due to the changes in how people share, Zuckerberg said that they were discussing about becoming video-first, a statement that reflects his decision to be mobile-first in 2012. A primary step toward becoming video-first is Facebook Live.
Facebook has been generating revenue faster than users due to the fact that it has plenty of open space to expand ad load. It gained ad impressions 49 percent year over year.
However, the company cautioned investors that there is little room left to grow ad load without affecting the user experience. Beginning in mid-2017, Facebook will have to increase the user base and time spent in order to boost its ad load.
The company can also look to Audience Network, which enables its advertisers to target users off-site “We continue to invest in ad tech,” COO Sheryl Sandberg noted. “Audience Network is a key part of that.”
Facebook manipulates a couple of long-term plans, from starting to offer businesses a foothold in Messenger to its virtual reality technology, Oculus.
Facebook Stock Gains in After-hours Trading
Shares of Facebook jumped 6.45 percent to $131.29 in after-hours trading on Wednesday after the social media giant released better-than-expected results for the second quarter of this year.
The company believes its strengths offset the fact the it is trading at a premium valuation based on the evaluation of its current price compared to factors such as earnings and book value.
Facebook has recently shown a weakly upbeat performance of 0.51 percent, which was sustained at 8.15 percent in 1-month period.