Why Facebook's profits continue to soar

Facebook beat expectations with its earnings in fourth quarter of 2015, sending company stock soaring. What’s driving the social media giant's financial success?

Dado Ruvic/Reuters/File
A man poses with a magnifier in front of a Facebook logo on display in this illustration taken in Sarajevo, Bosnia and Herzegovina. Facebook Inc. smashed investors' expectations with a 52-percent jump in quarterly revenue as it sold more ads targeted at a fast-growing number of mobile users.

Facebook has been having a great year.

According to an earnings report released Wednesday, the company earned 79 cents a share on revenue of $5.84 billion in the fourth quarter of 2015. The social-media giant topped both analyst predictions and its own performance from a year ago.

"2015 was a great year for Facebook,” founder and CEO Mark Zuckerberg said in a press release. “Our community continued to grow and our business is thriving. We continue to invest in better serving our community, building our business, and connecting the world."

Mr. Zuckerberg’s own fortune has grown as well: his personal net worth is now $47 billion, making him the sixth-richest person on earth.

Facebook has seen the vast majority of its growth come from mobile. An average of 934 million people were using Facebook on phones, tablets, and other mobile platforms per day in 2015, and an average of 1.44 billion people were using Facebook per month on mobile. Facebook says that’s an increase of 25 percent and 21 percent, respectively.

As Facebook’s mobile user base has increased, so has its mobile advertising revenue. Mobile advertising revenue accounted for 80 percent of all total advertising revenue for the fourth quarter of 2015, up from 69 percent a year ago.

"Clearly the (Facebook) numbers are just stellar in terms of revenue growth, profitability, all the metrics that really matter," Pivotal Research Group analyst Brian Wieser told USA Today. "Facebook's numbers affirm its co-dominance of the industry with Google. These paces of growth on such large bases of [pre-existing] revenue just remind you what remarkable gains Facebook continues to make in the industry."

Additionally, Facebook continues to dwarf the growth of social-media rival Twitter, which has recently been facing serious personnel challenges. This past Sunday, Twitter confirmed that five key executives, including the heads of media and product, had left the company.

Twitter also has been considering making major changes to its core product by expanding the number of characters users have available for tweets, from 140 to 10,000.   

The personnel announcements and potential product changes have sent Twitter’s stock plunging, to less than $17 a share. By comparison, Facebook stock continues to climb, to more than $100 a share.

Facebook is planning to roll out its own product changes within the next few months. Soon, the company will unveil "Reactions" -- six different emojis  (including “love” and “sad”) that will allow users to convey a wider range of responses than the traditional “like” button, which is sticking around.

Despite user requests, though, Facebook is not intending to introduce a “dislike” button anytime soon, and it’s possible that it never will. Zuckerberg has said that introducing a “dislike” button, or something similar, runs the risk of introducing too much negativity into users’ Facebook experience.

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