Facebook Inc. on Wednesday put to rest any lingering doubts about its ability to transform its business into a mobile-advertising juggernaut.
The social network reported that profit more than doubled and revenue topped estimates for the ninth straight quarter. About 62% of Facebook's ad revenue now comes from advertising on mobile devices, which this year is expected to eclipse newspapers, magazines and radio in the U.S. for the first time, according to eMarketer.
Facebook also continued to show it can weather concerns that it is losing its "cool" factor among teens or irking users worried about privacy. Facebook added another 40 million users in the second quarter, with one-fifth of the world's population now logging into the social network at least once a month.
"This is a good quarter for us," said Facebook chief executive Mark Zuckerberg on a conference call with analysts Wednesday, but "there's still so much room to grow," he said.
The results sent Facebook's stock to an all-time high in after-hours trading, rising 3.7% to $75. That is nearly double Facebook's initial public offering price of $38.Facebook's revenue rose 61% to $2.91 billion in the second quarter, generating a profit of $791 million, up from $333 million a year ago.
Facebook started placing ads on its mobile site and app only two years ago around the time of its initial public offering. It has now found itself in an entrenched battle with Google Inc., fighting to inhale mobile advertising dollars that would otherwise have gone to the Web, print or television. Anyone else would be a distant third.
Facebook is projected to command about 18% of the roughly $17.7 billion U.S. mobile ad market this year, up from 9% two years ago, according to eMarketer. Google will remain No. 1, but its share is expected to fall to 39.8% from 49.8% during that time.
"What Facebook has done with mobile is one of the most impressive things I've seen an Internet company do in recent years," said Mark Mahaney, an analyst for RBC Capital Markets, after the earnings release Wednesday. Mr. Mahaney warned, though, that Google is still the behemoth in the industry and might be only beginning to assert itself on the platform.
In an effort to entice big brands to spend more on its site and app, Facebook is making a bigger push into premium video advertising. It also launched a mobile advertising network in April through which Facebook sells ads that actually appear on mobile apps that the company doesn't own. Depending on how many apps choose to participate, Facebook could expand its business through the ad network.
Facebook has also invested in market research data to try to prove to brands that ads on the platform are effective. It has convinced some large advertisers to put more resources into Facebook, helping boost revenue. But there are still skeptical advertisers, and if Facebook can convince them, too, it will see even more growth.
On Wednesday's conference call with analysts, Facebook Chief Operating Officer Sheryl Sandberg called attention to the social network's ability to sell ads to small businesses. She told the story of Chumbak, a maker of Indian-inspired products. After the company's owners used their life savings to start Chumbak, they began purchasing Facebook ads, which are now responsible for generating 35% of that company's online revenue.
Ms. Sandberg pointed to an advertising campaign in India designed specifically for low-end feature phones. She saidProcter & Gamble Co.'s Gillette brand launched its Vector 3 razor there, where 80% of the 100 million users of Facebook in India are on mobile.
She also pointed to a McDonald's video ad campaign on Facebook that used anthropomorphic french fries as soccer players and re-enacted World Cup scenes.
Beyond advertising, investors continue to pay attention to Facebook's user growth, which has been steady as it blankets more of the world's Internet population. The company said 1.32 billion users logged into the service at least once a month during the quarter, up about 3.5% from 1.28 billion three months earlier. The number of users who logged in daily grew to 829 million on average in June, up from 802 million in March, indicating people are spending more time on the platform.
It isn't clear whether the latest privacy flap—a furor over a psychological experiment Facebook conducted on its users—will cause people to leave the social network. Ms. Sandberg apologized earlier this month for not properly communicating to its users about the experiment, which was exposed last month and conducted in 2012 to determine whether Facebook could alter the emotional state of its users and prompt them to post more positive or negative content.
On the conference call, Facebook executives didn't address the uproar over the experiment. But most numbers have indicated that people continue to use the service more, despite ongoing privacy concerns raised by incidents like the experiment.
In the U.S., where the market has been saturated with Facebook users for years, mobile users spent 157 million minutes on the platform in June, according to comScore, a 50% increase year-over year, including Facebook's photo-sharing app Instagram. Facebook and Instagram shared 200 million unique visitors in June, up from 185 million a year ago. That is second only to properties controlled by Google and Yahoo Inc.
If there is any other worry about Facebook, it is the company's inability to innovate. It has launched several stand-alone apps, including Poke, Paper and Slingshot, all of which have received a lukewarm response from users. In May, Facebook shut down Poke, which was a competitor to messaging service Snapchat.
Facebook has pointed to its Messenger app as a success, but it forces users of its mobile app to download it to send and receive Facebook messages. It has found innovation elsewhere, paying $19 billion for competing messaging program WhatsApp and buying virtual-reality headset maker Oculus VR for about $2 billion.
Mr. Zuckerberg signaled to investors that he would continue to make similar investments. "It's not that we're necessarily going to go out and have a lot more new strategic priorities, but we expect to go very deep on the priorities that we have to make sure that we completely nail them all," he said.
Meanwhile, Google, has stretched its tentacles into numerous areas outside of advertising, from self-driving cars, to television streaming devices, to wearables and home electronics.
Among the biggest themes on Facebook's earnings call was a simple message: The company plans to move slowly on various projects, like expanding the places Facebook ads can go, creating auto-play video advertisements, and turning its Instagram acquisition into a moneymaker.
"We want to make sure we don't get ahead of ourselves," Mr. Zuckerberg said.
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