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Facebook - Advertising And Mobile Continues To Drive Results

The Value Investor picture North American and Canadian ARPU rose to $4.85 up from just $3.40 in the third quarter of last year. European ARPU came in at $1.96. Note that the largest markets in terms of user bases are Asia and the rest of the world. These generated ARPU of $0.81 and $0.67 per quarter, respectively. And once again, the big surprise came from mobile advertising revenues, which made up 49% of total advertising revenues. Note that Facebook only started with mobile advertising at the start of 2012. The fact that Facebook generates half of its revenues from mobile indicates the company has clearly turned this into a success. Mobile revenues in terms of total advertising revenues stood at merely 41% in the second quarter, and just 30% in the first quarter of this year. Also noteworthy, the mobile daily active user base increased by 38 million to 507 million users, while total daily active user base rose by merely 29 million to 728 million. In fact, some 254 million users only access their favorite website through a mobile device by now. The strong performance on all metrics, only confirms my long-term thesis. I can easily foresee 1.5 billion monthly users in 2015, as ARPU could come in between $2.50 and $3.00 per quarter. This could translate into annual revenues of $15 billion, and earnings of $4-$5 billion. At the current valuation, a price-earning ratio of 25 for 2015 seems justifiable. Note that strong momentum was driven by Newsfeed and an increase in ads over the quarter, something which is not going to continue given that the company aims to balance the fine line between user engagement and increased advertisements.

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