Facebook Optimistic As Mobile Ad Revenues Soar

Facebook (NasdaqGS: FB - news) has enjoyed "another strong quarter" of growth - despite quarterly profits falling by 9%.

The social network has been investing heavily in mobile advertising, and the development of two recent acquisitions: the photo-sharing app Instagram and the WhatsApp messaging service.

Costs and expenses at the company reached $2.77bn (£1.8bn) in the three months to June - an 82% increase compared to the same period a year ago.

Even (Taiwan OTC: 6436.TWO - news) though Facebook's revenues have exceeded analysts' expectations, jumping from $2.91bn (£1.86bn) to $4.04bn ($2.59bn), shares in the social network still fell in after-hours trading by 4.2%.

The company had warned that profit margins could be dampened by its investment strategy, but analysts do believe this will help create significant revenue streams in the coming years.

A push towards mobile platforms is already paying dividends for Facebook.

Adverts on mobile devices now account for 76% of Facebook's advertising revenue, compared to 62% in the second quarter of 2014.

And video adverts, dominated by Google (Xetra: A0B7FY - news) , the owner of YouTube, have also been Facebook's fastest-growing category of internet advertising.

According to Facebook, it had 1.49 billion monthly active users as of 30 June, an increase of 13% in the space of 12 months. Of these, 1.31 billion are using the service on mobile devices.

When trading closed in New York on Wednesday, Facebook's share price stood at $96.99 (£62.15), which means the company is now valued at $276.4bn (£177bn).

Facebook's financial results come a day after Twitter (Xetra: A1W6XZ - news) confirmed it was still struggling to add users, even though its revenue for the second quarter was also above analysts' expectations.

Twitter has 316 million monthly active users, barely a fifth of its rival.

The site's co-founder, Jack Dorsey, has admitted the company is "not satisfied with our growth in audience" and is plotting a massive overhaul of the service which could see it looking a lot more like Facebook.

Chief Financial Officer Anthony Noto has also conceded that many people simply find the social network too difficult to use.