Facebook Inc (NASDAQ:FB)’s quarterly sales went up by 61% on the year to $2.91 billion. Bloomberg Contributing Editor, Paul Kedrosky, and Cory Johnson analyzed how sustainable these profits were on Bloomberg TV. Facebook has made an incredible platform transition to mobile advertising, which now contributes to 62% of their advertisement revenue.
“We are starting to see a business that has much greater profitability than we knew going into this. When we look at the operating profit margins for this company, they are getting a lot better than they were even four, or six or eight quarters ago,” said Johnson.
When you take out the non GAAP numbers, stock compensation charges in the case of Facebook Inc. (NASDAQ:FB) on account of their IPO, he felt that Facebook Inc (NASDAQ:FB) will be even more profitable in terms of dollar amount as well as percentage. The company’s revenue was growing at a much faster pace than their costs.
Speaking on other potential revenue streams, Kedrosky said that Facebook Inc (NASDAQ:FB) currently has 9% of global mobile ad revenues and 22% of global revenues in general. Their core market is growing at 100% core year-over-year with 48% gross margins. “They can grow this business at these kinds of rates for probably another year or two in the core business, without having to make a transition to making Oculus being successful or loading Instagram with ads,” he said.
The excellent numbers are indicative of the pervasiveness of Facebook Inc (NASDAQ:FB). Their revenues are rising primarily because of the advertisements they feature and the price per advertisement has grown by 123%. The placement of the advertisement has also changed strategically. Facebook Inc (NASDAQ:FB) is now placing more advertisements in the news stream, and lesser in the sides. Besides this, 62% of their advertisement revenues are coming from mobile advertisement. So they have made the right transitions that will make their core product a success.