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Facebook reports a big quarter for mobile ads

The business that was non-existant last year is now a major revenue driver and possibly the future of the company.

Facebook is making money, and a good chunk of it is already coming from advertising on phones.

The world's largest social network said Wednesday it made a $219 million profit in the first quarter on nearly $1.5 billion in total revenue, up 38 percent year over year. (Profits fell just short of Wall Street expectations.)

Not surprisingly, advertising sales accounted for most of that revenue (85 percent or $1.25 million), but somewhat more surprising is that advertising on mobile devices accounted for 30 percent of the ad revenue. A year ago, Facebook had no mobile ad revenue.

Reports of Facebook's declining popularity are also overblown, according to first-quarter numbers. Though the social network is obviously not growing at the blazing speed it once was, it still draws more than 1 billion monthly active users. Mobile monthly active users topped 750 million as of March, a 54 percent jump over last year.

Mobile, mobile, and more mobile

Facebook has made it clear that mobile is the future, and the healthy growth of its mobile ads business signifies success in that market, at least for now. The company also threw its presence behind Facebook Home, a launcher for Android that brings the Facebook experience to your smartphone's home screen. Facebook Home had more than 500,000 installationsin its first week of release, but reviews of the launcher have been mixed.

Both Facebook Home and the HTC First, the only phone that comes with Facebook Home preinstalled, were released in the second quarter, so the success of those products is still unknown.

CEO Mark Zuckerberg said during the company's Wednesday earnings call that Facebook's primary focuses this year are mobile, building a "better monetization engine" (or fine-tuning advertising), and introducing services that take advantage of the recently unveiled Graph Search.

Graph Search, which just rolled out to smartphones last month, makes it easy for you to find people based on their job, location, and likes, but the new search engine also makes it easy for advertisers to target Facebook users based on the same.

Zuckerberg said Home and Graph Search, are "long-term investments" that are "important areas for us to focus on."

Zuckerberg also noted that Facebook hasn't been promoting Home as heavily as it plans to in the future. The Facebook app doesn't encourage Home installation, for example, but that will soon change.

All ads all the time

Facebook in the first quarter launched a slew of products to help companies target and market to we Facebook users more effectively. As Facebook continues to steer toward mobile, expect more ads that are based on what you like, where you live, and what you do. You can also expect to them to be more visually appealing.

Despite the strong earnings and progress in mobile, Facebook still must work to prove its worth to advertisers.

"Brands got very used to TV, and they got very used to search," said COO Sheryl Sandberg during the earnings call. "We are a third thing."


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