Facebook Posts Loss In First Quarterly Earnings Report

Facebook reported a loss Thursday in its first quarterly report as a public company, but revenues surged 32 percent over year-ago levels to nearly $1.2 billion.

The results were roughly in line with analyst expectations but Facebook shares (FB), already under heavy pressure, fell sharply after the earnings release.

In a conference call with analysts that was broadcast over the Internet, Facebook executives led by CEO Mark Zuckerberg said they were working hard to build new "social" advertising that will allow the company to monetize the growing percentage of its users who come to the service through mobile devices.

"Mobile is a huge opportunity for Facebook," Zuckerberg said.

"Our goal is to connect everyone in the world," he said, adding that most of the world's people soon will have a mobile device, so it makes sense to improve the Facebook mobile experience.

Chief operating officer Sheryl Sandberg said the company has been experimenting with "sponsored stories" that allow advertisers like Wal-Mart to pay to ensure that more users see a certain piece of content in their Newsfeed. She said the strategy allows Facebook to avoid the problem faced by many media companies who have a hard time monetizing the small screen of mobile devices.

"Sponsored stories in Newsfeed are the cornerstone of our mobile advertising effort," she said.

Zuckerberg said Facebook's opportunity to build out a platform for other developers is larger than generally understood.

He sketched out a future in which a new car buyer would sign into the car's computer and immediately have access to contacts, music, restaurant listings and the recommendation of friends.

The social networking giant posted a net loss of $157 million, or 8 cents a share, largely due to expenses related to its May 17 public offering. Excluding the special charges, Facebook said it earned 12 cents a share, in line with Wall Street expectations.

Excluding share-based compensation and related payroll tax expenses, Facebook said operating income for the second quarter was $515 million, compared with $477 million for the second quarter of 2011.

In the earnings release, Zuckerberg said the company was focused on "mobile, platform and social ads."

BTIG analyst Richard Greenfield said investors were concerned that Facebook did not offer any guidance for its earnings going forward.

"Growth is clearly slowing on both the user and revenue basis, and without guidance to make people believe it's growing, you have a large part of investor fear," he said.

Facebook shares, which have yet to regain their $38 offering price, fell $2.50 to $26.84 before earnings were released and were down another 10 percent in after-hours trading. Even before the release, Facebook shares were hit by the poor earnings performance of gaming company Zynga, which accounts for more than 10 percent of Facebook's revenue.

Michael Matousek, a senior trader at U.S. Global Investors Inc, said facebook beat expectations, "but the Street was looking for more."

"The big question with the stock is how it will monetize its billion or so users," he said. "A lot of people think they can't convert those users to money."

Facebook said it had 955 million monthly active users, up from 901 million users at the end of March. The company generated 84 percent of its revenue, or $992 million, from advertising.

The company had about 4,000 employees as of June 30, up from 3,200 at year-end, a number that was described as small relative to Facebook's enormous user base.

Facebook went public in a massively hyped IPO that was widely seen as a failure, both because of technical glitches and because the price set by underwriters failed to hold, leaving behind legions of new, unhappy investors.

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