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Facebook Sees Big Boost In Mobile Ad Revenue

The social network continues to invest heavily into advertising technology.

[Photo: Flickr user Johan Larsson]

Showing continued growth on mobile, Facebook's advertising revenue in the third quarter jumped 64% to $2.96 billion—two-thirds of that from the mobile side—year over year.

Facebook now has 1.35 billion monthly active users—1.12 billion of them active on mobile—as of September, up 2% from the previous quarter. Of its users, 864 million are active on the network daily—703 million of them from their mobile devices.

"This has been a quarter with strong results," said CEO Mark Zuckerberg in its investor earnings call Tuesday. "While we're investing aggressively and making progress toward our big, long-term goals, we continue to execute well on our near priorities."

The social network reported $806 million in profit on $3.2 billion in revenue, a 59% growth in sales year over year. In accordance with revenue, operating costs rose as well, particularly in research and development, where Facebook poured $608 million, a 64% increase from the same period last year.

"2013 was the first year the average American adult spent more time on digital media than watching TV," Chief Operating Officer Sheryl Sandberg said. But currently, "advertisers spend only about 11% of their budgets [on mobile]." Looking ahead, Facebook will continue investing heavily into advertising technology. "We think they provide a necessary foundation for the ad industry to shift to mobile," she added.

Sandberg said Facebook's age and gender targeting is 45% more accurate than the industry's digital standard. Furthermore, she noted the company will be "limited and slow" with its approach to autoplay video ads on Facebook and advertising on Instagram.

Revenue from payments and other fees totaled $246 million, a 13% increase from the same quarter in 2013. However, payments revenue from games declined 2%, a trend chief financial officer Dave Wehner said the company expects to continue along with the decline in desktop computing.

Aside from investments in advertising, Zuckerberg also discussed the company's long-term bet on Oculus, the virtual reality tech company it acquired earlier this year for $2 billion. More than 100,000 kits of Oculus's virtual-reality headset have been shipped to developers. "It's still early for Oculus, but we're encouraged to see the variety of apps and games developed for this platform," he said. "It needs to reach a very large scale—50 [million] to 100 million units—before it becomes a meaningful platform. I do think it's going to take a bunch of years."