How Facebook Makes Money

Facebook Inc. (FB) reported third quarter financial results. The company reported total revenues of $3.20 billion, which was an increase of 59% over revenue of $2.02 billion in the third quarter of the previous year.

Revenue from advertising was $2.96 billion, representing an increase of 64% over third quarter advertising revenues. Revenue from mobile advertising was 66% of overall revenue and was up 49% from third quarter 2012 mobile advertising revenues. Revenue from payments and other fees were $256 million, representing an increase of 13% from the same quarter in 2013.

Full-year revenues for Facebook for the fiscal year were $7.87 billion, a 55% increase from full-year 2012 revenues. Generally accepted accounting principles (GAAP) income from operations for Facebook for the third quarter was $1.40 billion, an increase of 90% over $736 million for the third quarter. Profit margins were 44%, up from 37% in the same quarter.

Daily active users for September were 864 million on average, representing a 19% year-over-year increase. Mobile daily active users were 703 million on average, representing a 39% increase year-over-year. The company had a market capitalization of $207.25 billion and a massive 1.2 billion total users worldwide.

Facebook virtually created the social media industry. The company’s effectiveness regarding mobile advertising and its success in new platforms have allowed the social media giant to surpass investors’ expectations continually.

Facebook is particularly skilled at bundling services for both mobile and non-mobile platforms. The company is so effective at bridging the gap between mobile and non-mobile platforms that the distinction between the company’s efforts in each area is described as moot. The company has aggressively acquired mobile technology companies, such as WhatsApp and companies in other spaces, such as Oculus VR. Going forward, further aggressive expansion in the mobile space along with added-value services, such as directed advertising, are to be expected.