MENLO PARK -- Facebook reported blockbuster financial performance in its most recent quarter, including its biggest revenue jump since the company went public last year, but investors were rattled as executives acknowledged a potentially disturbing slip in younger teens' visits to the social network.
The company saw impressive growth in the quarter ending Sept. 30, as mobile ad sales grew to account for nearly half of Facebook's $1.8 billion in advertising revenue. Analysts say Facebook's mobile ad business is increasingly important because more Internet users are using smartphones and tablets to go online. Facebook did not even have a mobile ad business when it went public in May 2012.
"It's a pretty incredible sign of how Facebook has evolved over the past year," Facebook CEO Mark Zuckerberg told industry analysts Wednesday.
But for the first time, Chief Financial Officer David Ebersman acknowledged that, while Facebook visits by all U.S. teens remained stable, "we did see a decrease in daily users specifically among younger teens." While Ebersman downplayed that information, it was a change from last quarter when Zuckerberg said teens were not leaving the site.
After closing Wednesday at $49.01, Facebook shares shot up in late trading following the release of the financial results, but the share price fell after executives spoke with analysts on a conference call.
Facebook reported third-quarter profit of $425 million, which amounts to 17 cents a share or 25 cents a share after adjusting for one-time costs. Overall revenue increased 60 percent to $2.02 billion from the same time last year, beating analysts' expectations of $1.91 billion in revenue. Analysts had expected earnings of 19 cents a share after adjusting for one-time costs.
"There's no doubt those are excellent results," said Karsten Weide, who tracks Internet advertising as vice president of media and entertainment for IDC.
While Ebersman cautioned that it's difficult to measure teen engagement because of false age reporting, Weide called the comment about young teenagers "definitely worrisome."
"Facebook's demographic is still overwhelmingly young, so they cannot show that the very young demographic is not growing up with Facebook and is instead growing up with something else," Weide said. "It's the same problem that MTV faced, that people were aging out and the younger ones didn't grow up to take their place. If that happens with Facebook, it could endanger their business."
Martin Pyykkonen of Wedge Partners called the comment "something to watch and to consider."
Pyykkonen called the general behavior of young teenagers "a fickle thing. The target base of advertisers is still in that traditional 18-to-24 demographic and Facebook and advertisers are looking at a demographic more in their 20s."
Even if it turns out that young teenagers are staying away from Facebook, Pyykkonen said, the company's financial performance means "they're still growing their revenue and accelerating their revenue base, so it's coming from somewhere else. If part of the population is dropping off, the rest of the population is becoming more engaged."
And increasingly more engaged with Facebook via smartphones and tablets.
Pyykkonen predicts that by the middle of next year, more than 60 percent of Facebook's ad sales will come from mobile devices.
"Obviously they're monetizing (mobile advertising) really well," he said. "From an advertiser's stand point, Facebook's numbers are huge."
Contact Dan Nakaso at 408-271-3648. Follow him at Twitter.com/dannakaso.