Facebook's mobile business expands in first quarter

Wed May 1, 2013 5:02pm EDT

The sun rises behind the entrance sign to Facebook headquarters in Menlo Park before the company's IPO launch, May 18, 2012. REUTERS/Beck Diefenbach

The sun rises behind the entrance sign to Facebook headquarters in Menlo Park before the company's IPO launch, May 18, 2012.

Credit: Reuters/Beck Diefenbach

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(Reuters) - Facebook Inc's mobile advertising business continued to expand in the first three months of the year, but the social network's rising spending restrained profit growth.

Shares of Facebook were up 11 cents at $27.54 in after-hours trading on Wednesday.

Mobile ad revenue, which accounted for 30 percent of Facebook's ad revenue in the first quarter, was at the higher end of the range analysts expected, said Macquarie Research analyst Ben Schachter. But he said, "it needed to be higher for people to get really excited about trend lines."

Facebook's advertising revenue growth, which slowed sharply last year, has regained some momentum as the company has pushed more ads to users on mobile devices such as smartphones and tablets. In the fourth quarter, mobile ads accounted for roughly 23 percent of Facebook's revenue.

The world's largest social network said it now counts 1.11 billion monthly active users and about 665 million daily active users.

The company said the number of monthly users who logged on solely through mobile devices more than doubled to 189 million users from a year ago.

The company has rolled out a string of big product launches and revamps in recent months, including an overhaul of its newsfeed and search feature, as well an app for Android smartphones that puts Facebook features front and center on phone homescreens.

The various initiatives have contributed to rising spending, with Facebook's 60 percent year-on-year increase in costs and expenses outpacing the 38 percent revenue increase.

Facebook said it earned $219 million, or 9 cents a share, in the first three months of the year, compared to $205 million, or 9 cents a share, in the year-ago period.

Excluding certain items, Facebook said it earned 12 cents a share. Analysts polled by Thomson Reuters I/B/E/S were looking for adjusted EPS of 13 cents.

Facebook's revenue in the first quarter totaled $1.46 billion, versus $1.06 billion in the year-ago period, and roughly in line with analyst expectations. Advertising revenue was up 43 percent in the first quarter, the fastest growth rate since the end of 2011.

(With additional reporting by Gerry Shih; Editing by Phil Berlowitz)

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