LIVE: Facebook Sees A Big Beat On Profits But Desktop Business Is In Decline (FB)

April 23, 2014 at 17:03 PM EDT

Facebook reported its Q1 2014 earnings:

Revenues: up 72% to $2.5 billion (analysts expected $2.36 billion) that's a nice beat.
Earnings per share: $0.34 (analysts expected $0.24) that's a huge beat.
Revenue from advertising was $2.27 billion, up 82% vs Q1 2013.
Mobile advertising revenue was 59% of ad revenue, up from 30% in 2013.
Payments revenue was $237 million.
MAUs: 1.28 billion
CFO David Ebersman stepping down later this year; will be succeeded by David Wehner formerly of Zynga.
Cash was $3 billion - looks like those recent acquisitions of WhatsApp and Oculus have yet to hurt the balance sheet.

We're covering the release live, followed by CEO Mark Zuckerberg's earnings call with Wall Street. Refresh this page or click here for updates.

The stock went up more than 5% on the news after hours.

Now for some charts!

Note that Facebook's desktop business is essentially stagnant, maybe even in decline.

All its growth is coming from mobile. This chart from analyst Ian Maude shows that:

Maude attributes that mobile revenue growth to mobile app install ads — and we'd agree. These are the poorly understood ads that drive app downloads. Most people just see the non-app ads for brands and local businesses — but app ads, because they monetize instantly, are more valuable.

This chart from Maude backs up the case that on desktop, Facebook is essentially over:

These users are U.S. only. But the U.S. trends ahead of everyone else when it comes to Facebook because the company was born here and its highest percentage of user penetration is here.

This chart, also from Maude, shows that revenue per user is also down on desktop:

Revenue:

Here's the ad revenue split over a longer timeframe (from BI Intelligence):

Here are the monthly active users:

The mobile monthly active users:

And the mobile-only people:

And here's how those users split, from Business Insider Intelligence:

Here's Zuckerberg's formal statement on the numbers:

"Facebook's business is strong and growing, and this quarter was a great start to 2014," said Mark Zuckerberg, Facebook founder and CEO. "We've made some long term bets on the future while staying focused on executing and improving our core products and business. We're in great position to continue making progress towards our mission."

Now we're waiting for the Q&A with Wall Street analysts.

(Facebook has chosen some rather stuffy classical music for those of us on hold for the conference call.)

The call is about to begin ...

Zuckerberg: Starts with the user numbers. Then the acquisition of WhatsApp, Oculus and the Internet.org effort.

"These are important efforts that will help us achieve our mission over the long term."

"Our core FB app has an audience of over 1 billion people."

Next set of apps such as Messenger, Instagram and WhatsApp: IG reached 200m MAUs this quarter. "Monetization isn't our near term priority here."

Wants 100 million users on each new app before revenues are attached. Paper is an example.

Internet.org: Basic update on progress.

Next, "Understanding the world." Says FB has unique data that others don't. More to come at F8 developers conference.

"Our mobile app install ads have been one of our best performing products to date. Launched in January of last year."

"Advertising and the ability to reach people more broadly is one of the most important" things FB does.

He thanks CFO David Ebersman who is stepping down after five years. "I've learned a lot from Dave both personally and professionally and I'm grateful for everything he's done."

Sandberg: Also thanks Ebersman. "Great people build great teams and that's what David has done."

Ad revenue growth 82%, strongest ad rev growth rate in 3 years.

Saw growth from existing advertisers as well. Particular strength with SMB and DR. And packaged goods.

Sandberg touts a Canadian advertiser that pulled all its paper coupons in favor of Facebook ads — and saw positive ROI.

Ad targeting will improve. 10 times more advertisers are using custom audiences than last year. Ben & Jerry's is an example.

Simplifying ad tools: Self-serve ad tools are now available to SMB's. Buy now and install now buttons improve responses.

Ad network test is positive - but won't have meaningful results this year.

Ebersman: Made a personal decision to get back into healthcare where he worked before Facebook.

Now we're into the nitty-gritty numbers. Desktop rev up 8%.

Decrease in ad impressions due to cont'd shift in mobile use. Price per ad went up as fewer ads are seen in mobile.

Shift to desktop is a significant headwind to payments because payments in games business are mostly desktop.

Neither WhatsApp nor Oculus deals are yet closed, and haven't his FB's numbers yet.

Bad news! "Our y-o-y comparables will get more challenging from here. Over the rest of 2014 our y-o-y ad revenue growth rates will decline ... and be meaningfully lower y-o-y."

Questions!

Expenses: Ebersman says Q1 is lighter on expenses that usual quarters. Benefits from one time events.

The context:

It has been a huge quarter for Facebook. In the last three (fiscal) months the company has bought messaging app WhatsApp for $19 billion and virtual reality headset maker Oculus VR for $2 billion. It has opened the door for video advertisers, and begun carving out its messaging business into a separate app, Messenger. Lastly, the company has begun rolling out an off-Facebook advertising network.

At the same time, Zuckerberg has begun to outline his vision for the future of Facebook, "unbundling the big blue app."