Facebook Is Erasing Doubts on Mobile

The social networking company said Wednesday that it had revved up its mobile advertising from virtually nothing a year ago to 41 percent of its total ad revenue of $1.6 billion in the second quarter.

“Soon we’ll have more revenue on mobile than desktop,” Mark Zuckerberg, Facebook’s founder and chief executive, said in a conference call with analysts.

Facebook’s results elated investors, who sent the company’s stock up nearly 17 percent, to $30.94, in after-hours trading.

Analysts said the strong performance dissipated lingering worries that the company could not adapt to the current Internet environment, in which users are relying more on mobile devices instead of personal computers to access the information they want.

Those concerns have dogged the company since its disappointing initial public offering in May 2012, in which it sold shares at $38 and then saw them fall by half.

“One of the biggest overhangs from their I.P.O. is that this company had been blindsided by mobile,” said Mark Mahaney, an analyst with RBC Capital Markets. “They caught up. Instead of being behind the curve on mobile, they are ahead of the curve.”

The company said it had net income of $333 million, or 13 cents a share, in the second quarter. Excluding stock-based compensation expenses, profits were $488 million or 19 cents a share, compared with $295 million, or 12 cents a share, in the second quarter a year ago.

The company’s revenue soared 53 percent, to $1.81 billion.

Facebook had particularly strong demand for ads that appear in its users’ news feeds, the flow of updates from friends that they see when they log on. About 1 in 20 posts in the news feed is an ad, and advertisers cannot seem to get enough of them.

The company expects those ads to continue to grow in the second half, its chief financial officer, David Ebersman, said in a conference call with analysts.

One concern for the future is whether Facebook will annoy its users if it significantly increases the number of ads in news feeds, said Debra Aho Williamson, an analyst with eMarketer, a research firm.

“How many ads will people tolerate?” she asked.

Mr. Zuckerberg said Facebook’s studies had shown that users were noticing ads more, and the company was working to improve the quality and relevance of ads.

Facebook is also studying when and how to introduce video ads, which are expected to command at least several hundred thousand dollars each.

“We have nothing to announce today,” Facebook’s chief operating officer, Sheryl Sandberg, said in an interview. But she said video was “tremendously important” for users as well as marketers. Videos made and shared through Facebook’s new video feature in Instagram are growing quickly.

The company’s results also show how its users are continuing to shift toward mobile phones and tablets to use the site instead of a computer’s Web browser. Although the company’s total number of active monthly users worldwide grew slightly from the first quarter, to 1.15 billion, the number of people who use its mobile versions at least once a month grew 9 percent, to 819 million in that time.

Total ad revenue, a crucial measure watched by Wall Street, was $1.6 billion, up 61 percent from the second quarter of 2012. Of total ad revenue, 41 percent came from mobile, up from 30 percent in the first quarter.

“I think this shows that all the questions that people might have had in the past about whether Facebook could monetize on mobile devices, they’ve settled definitively,” Ms. Williamson said.

Users’ preference for reading Facebook on the go has created special revenue opportunities, like ads that prompt users to install mobile apps like games. But advertisers are generally willing to pay much less for a mobile ad than they are for the desktop.

The company’s sharp revenue growth reflects increased competition among advertisers to reach Facebook’s large user base, said Rob Jewell, chief executive of Spruce Media, a firm that helps advertisers like McDonald’s and the insurer Progressive to buy ads on the social network and measure their effectiveness.

Facebook’s ad rates are generally set through a bidding process, and Mr. Jewell said that his clients paid about 10 percent more on average for ads in the second quarter than in the first quarter. Ads in the news feed, both on the desktop and mobile versions of Facebook, were in particularly high demand, with rates up about 75 percent from the first quarter for both categories, he said.

“Facebook is the best channel for mobile app advertisers to purchase advertising,” Mr. Jewell said.

In the second quarter of 2012, the company reported a net loss of $743 million, or 8 cents a share. But that figure included $1.3 billion in compensation expenses related to the company’s initial public offering. In the year ago quarter, Facebook’s revenue was $1.2 billion.

The company far exceeded Wall Street’s expectations. Analysts had predicted the company would report earnings of 14 cents a share, excluding stock compensation costs, on revenue of $1.62 billion, according to a survey by Thomson Reuters.

Facebook’s surprisingly strong second-quarter earnings contrasted with those of Google, which last week reported disappointing profits in mobile advertising.

While the two companies are not strictly comparable because Facebook is expanding its ads from a much a smaller base, Ronald Josey, an analyst at JMP Securities, said Facebook was doing extremely well in mobile categories like ads prompting users to install new mobile applications.

“This company is becoming more and more of a mobile company,” he said.

This article has been revised to reflect the following correction:

Correction: July 24, 2013

An earlier version of this article misstated the title of Rob Jewell. He is the chief executive of Spruce Media, not the president.

Ministers Express Doubts on Expanding Data Protection Laws

BERLIN — E.U. justice ministers reacted coolly on Friday to a plan that would give consumers the ability to expunge the personal details Internet businesses have collected on them, essentially allowing individuals to block most kinds of online ads.

During an informal meeting in Dublin, the ministers expressed reservations about elements of the proposal, which would impose new limits on data collection and profiling and give national regulators the ability to levy hefty fines equal to 2 percent of sales on companies that failed to comply.

Alan Shatter, the Irish justice minister who chaired the closed-door meeting, said the ministers were concerned that the measures would stymie the Internet’s development by hampering the targeted advertising that makes possible most free services.

“An overall conclusion is that there is widespread acceptance of the need for a uniform approach to regulation,” Mr. Shatter said at a news conference. “There is also a widespread understanding of the need to ensure that business can properly work under any new structure while ensuring the existence of certain protections.”

Ireland holds the European Union’s rotating presidency through June, and Mr. Shatter is seeking an agreement among justice ministers on the proposal. The ministers must approve the plan before a proposal is put to the European Parliament.

Europe last updated its primary data protection laws in 1995, when the Internet was in its infancy and the concept of mining consumer data did not yet exist. The legislative effort to produce an updated law is expected to continue into 2014.

Mr. Shatter described the discussions with ministers as “very interesting and considered” but noted that the conclusion of the group, at least initially, was that updated E.U. data protection laws must be “balanced and proportionate” and not stifle businesses.

The comments by the ministers, their first public statements on the proposal, suggest that privacy advocates have a long road ahead. Viviane Reding, the European justice commissioner who initially proposed the changes last year, said much work still needed to be done.

Appearing with Mr. Shatter, Ms. Reding referred to the “difficult work on the table” before officials could put forth a plan. She said enhanced consumer protections would encourage more online commerce, which in turn would bolster the European economy. She referred to a European Commission study showing that Web businesses could save an estimated €2.3 billion, or $3.1 billion, in legal and other fees if E.U. data protection laws were harmonized.

“There needs to be the trust between citizens and the data controllers,” Ms. Reding said, adding that the more trust there was, the better it would be for business. “So this is a growth-enhancing project.”

Web businesses and advertisers see it differently. They consider the effort to tighten controls a threat to the advertising model that finances much of the Internet. Individual E.U. members are also divided on the issue.

According to a confidential memo prepared on Dec. 12 by E.U. administrators from Cyprus, which at the time held the Union’s rotating presidency and presided over meetings on the issue last year, several European countries have reservations about expanding consumer protections on the Internet.

Four countries — Austria, Estonia, France and Ireland — supported the new right to be forgotten, according to a summary of the meeting seen by the International Herald Tribune, but many countries expressed doubts, like Britain, Germany, Spain, Denmark and Luxembourg.

Representatives of Britain, Germany, Denmark and the Netherlands said a new online “right to be forgotten” could be used to limit freedom of expression, chilling the flow of information on the Web.

According to the memo, representatives of Britain, which has one of the largest advertising industries in Europe, repeatedly objected to many elements, citing concern for how the measure would affect the Internet’s development.