Facebook records Q3 loss depite improvements in mobile advertising and usage

Social networking site Facebook has posted a $59m net loss for 3Q12, which it has attributed to high taxation. The loss was  despite revenue increasing by 32 per cent year on year from $954m to $1.26bn, as the firm stepped up its efforts in mobile advertising.

“The GAAP (generally accepted accounting principles) income tax provision for the third quarter was $431m, representing a 116 per cent effective tax rate, driven by share-based compensation expense, a portion of which is not tax-deductible,” Facebook said in a statement. Excluding share-based compensation expense and related payroll tax expenses, the non-GAAP effective tax rate would have been approximately 40 per cent, it added.

86 per cent of the firm’s revenue came from advertising during the quarter, and 14 per cent of that revenue came from mobile. The number of active mobile users stood at 604 million as of September 30, 2012, marking an increase of 61 per cent year-over-year.

During the quarter, Facebook completely rebuilt its platform for Apple’s iOS operating system for faster and more reliable performance. It also continued its efforts to make it easy for mobile developers to build Facebook apps by launching new software development kits (SDKs) for iOS and Android and benefitted from deeper integration into Apple’s latest platform, iOS6.

“As proud as I am that a billion people use Facebook each month, I’m also really happy that over 600 million people now share and connect on Facebook every month using mobile devices,” said Mark Zuckerberg, Facebook founder and CEO. “People who use our mobile products are more engaged, and we believe we can increase engagement even further as we continue to introduce new products and improve our platform.”

Meanwhile, social gaming firm Zynga – which has created some of Facebook’s most popular apps, such as Farmville announced that it was cutting five per cent of its 3,200-strong workforce.

“We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and UK studios,” said CEO and founder Mark Pincus. “Additionally, we are reducing staffing levels in our Austin studio.”

Zynga relies heavily on Facebook for its success and even has a profit-sharing arrangement  set to end in 2015 where Facebook receives 30 per cent of everything Zynga makes through the social media site. Last year the company filed for an IPO and said its future was in mobile, but at the same time concerns were raised that while the company relies heavily on sales of virtual goods to users, such users constitute a tiny proportion of the overall numbers who play hugely successful games.


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