September 22, 2023

Facebook Beats Expectations on Strong Mobile Growth

The company said it had net income of $333 milion, or 13 cents a share. Excluding stock-based compensation expenses, profits were $488 million or 19 cents a share, compared to 12 cents a share in the second quarter a year ago. Revenue soared 53 percent to $1.8 billion.

“We’ve made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile,” Mark Zuckerberg, Facebook’s founder and chief executive officer, said in a statement. “The work we’ve done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future.”

The company’s results show that its users are continuing to shift toward mobile phones and tablets to access 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.

Of total advertising revenue, 41 percent came from mobile, up from 30 percent in the first quarter.

Users’ preference for accessing Facebook on the go has created unique revenue opportunities, such as 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, president 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.

“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. Excluding such one-time items, the company’s profit a year ago was $295 million, or 12 cents a share, and its revenue was $1.2 billion.

Wall Street analysts were expecting the company to report earnings of 14 cents a share on revenues of $1.62 billion, according to a survey by Thomson Reuters.

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Corner Office | Dan Schneider: Dan Schneider, Founder of SIB, on Handling Employee Errors

Q. Do you remember the first time you were somebody’s boss?

A. Yes. I was 16 and I started at this restaurant in the summer even before it opened. I was digging holes for the fence out front and picking up restaurant supplies. I was just the gofer.  Once the restaurant opened, I became a daytime prep cook. And three weeks into it, they fired the executive chef and put me in charge of the line cooks, who were probably 10, 15 years older than me. So that was my first experience with management.

Q. And so was that an easy transition for you?

A. It kind of just felt normal and natural. I think that being an only child, it’s easier to manage people because you’re used to being the only one — you’re top of the food chain because there is no chain. So to manage people, it’s just a natural progression.

Q. What about after that? 

A. I started making balloon animals at T.G.I. Friday’s. A company would pay the restaurant to have me go there, and then I’d make balloon animals and entertain the kids and I’d work for tips.  Then I realized that the lady who runs the company that hired me lives in Arizona. So I teamed up with somebody and approached all the T.G.I. Friday’s in the area and said: “Why don’t you pay us to do it?  We’ll control it locally.”  So then I managed 10 people who were going around to all these different restaurants — and I was 17 years old.  Then somebody kept offering me a job to work in selling mobile phones — this was when digital phones were first coming out.

Q. Who was doing that?

A. It was the people in this store I went into to buy something for my cellphone because they were so surprised that — this was before 10-year-olds had cellphones — there was this 17-year-old kid who had a cellphone. They asked me why I needed it. “Well, I have to schedule my employees,” I told them. And they said, “Oh, we want this guy to work for us.”  They just kept calling, “Come work for us. Come work for us.” So finally, I said,  “All right, I’ll try this.” So I got into B2B [business to business] sales at 17.

Q. All while you’re going to school?

A. No, I dropped out of school when I was 16. I have a ninth-grade education.  But I was getting pretty big customers.  I would pay one of my friends to cut school and come with me to the city and we’d go into a hospital, and we’d sneak up to the top floor and we’d put fliers in the interoffice mailboxes from the top floor to the bottom floor about a special deal for hospital employees. And my phone was ringing for orders before we were even walking out of the building, because this was when there weren’t cellphone stores on every single corner. Then I started to get sick of going out and getting customers.  So, I figured, why don’t I open up a store and just sit there and have people come to me? So I opened a store right when I turned 18, and I grew that to about 12 stores before I was 20. 

Q. You were obviously making a lot of money at a young age.

A. I bought a 3,600-square-foot house when I was 19.  My friends who would come over would wonder when my parents were coming home. “No, they’re never coming home,” I said to them. “This is mine.”

Q. Then what?

A. I built up the network of stores, then sold them off individually. After that, I started a company that wholesaled mobile phones. I did that for about two years and the company did really well, with more than $35 million in revenue. But then I realized that the more money that you make, it doesn’t necessarily mean that you’re happy. I said to myself: “I don’t do anything. I don’t have any hobbies. All I do is work. This is stressful. Yeah, I have this company, but I want to be a kid.” So I called up some people in the industry that I knew and told them, I want to them take over the company and just pay me royalties. 

I decided I was really going to try to relax and get out of work mode, so I sold my house and got into shape. I took up cycling. I rode 30 miles a day, six days a week.  I got into kiteboarding and traveled all over for two and a half years. All I did was have fun.  I took not working like a job.  I’d wake up, I’d ride my bike.  I’d go on vacation every two weeks.  It was the best two and a half years of my life.   

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Verizon Workers Vote to Support Strike

The main union representing Verizon’s workers announced on Thursday that its 35,000 members at Verizon had voted overwhelmingly to authorize a strike once their three-year contract expires on Aug. 6.

Officials with the union, the Communications Workers of America, said the vote was no surprise because, in their view, Verizon was seeking the largest concessions ever from its unionized workers.

Candice Johnson, a spokeswoman for the union, said 91 percent of the workers who voted approved the strike authorization. Such a strike vote does not necessarily mean there will be a strike — negotiators usually settle the contract dispute before the contract expires.

The Verizon contracts that expire on Aug. 6 cover nearly 45,000 workers stretching from Massachusetts to Virginia, including thousands of Verizon employees in another union, the International Brotherhood of Electrical Workers. That union is holding a separate strike authorization vote.

Verizon officials say they need to have more flexibility and to hold down costs as customers increasingly move from landline to mobile phones. To achieve those goals, the company is proposing to make it easier to fire workers, tie raises more closely to job performance and require workers to contribute to their health insurance premiums.

Union officials say Verizon has also demanded more freedom to contract out work, a pension freeze for current workers and the elimination of traditional pensions for future workers.

“Verizon has put on the table the most aggressive set of contract demands we’ve ever seen,” said Robert Master, legislative and political director for the communications workers in the Northeast. “From our perspective, this hugely profitable company that made $20 billion over the last four years, despite the worst economy in 75 years, seems determined to turn tens of thousands of secure middle-class jobs into lower-wage, much less secure jobs.”

Nearly one-third of Verizon’s 200,000 workers are unionized and many of them are linesmen, phone installers and call center workers.

Verizon officials say they need concessions because the industry is changing so rapidly and because they are competing against some nonunion rivals.

Verizon’s landline businesses had revenue of $41.2 billion last year, down 2.9 percent from the previous year. At Verizon Wireless, a joint venture with Vodafone Group, a British company, revenue was $63.4 billion, a 5.1 increase over the previous year.

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Nokia to Cut Costs More After Loss

BERLIN — The two largest European makers of telecommunications equipment, Nokia and Ericsson, announced plans Thursday to continue or accelerate cost-cutting efforts in the face of rising competition, internal reorganizations and weak demand in North America.

Nokia, which sells more mobile phones than anyone else, said it planned to cut more than the €1 billion, or $1.43 billion, it had previously planned to trim from its operating expenses by 2013. The company, based in Espoo, Finland, made the announcement while reporting a €368 million second-quarter loss, its first since the third quarter of 2009.

Ericsson, the largest maker of telecommunications networking equipment, reported a 60 percent increase in profit for the quarter but took a restructuring charge of 1.3 billion Swedish kronor, or $202 million, more than some investors had been expecting, to pay for layoffs in Sweden.

The separate announcements set off heavy trading in the shares of both companies in Europe.

Ericsson’s shares closed off 9.7 percent in Stockholm, where it is based. Nokia’s shares ended the day up 2.5 percent as investors welcomed the phone maker’s intention to increase its austerity measures, even though the company did not specify a new target.

Pete Cunningham, an analyst in Reading, England, at Canalys, a research firm, said Nokia’s sales decline stemmed from its difficulty selling smartphones in China that use its Symbian operating system. Nokia said in February that it planned to replace Symbian with Microsoft Windows Phone software starting later this year.

“This is obviously not good news from Nokia,” Mr. Cunningham said. “I think the appetite for Symbian devices has fallen away very quickly since Nokia made the announcement about moving to Microsoft in February. This shows they definitely need those Windows phones as soon as possible.”

Stephen Elop, the Nokia chief executive, hired from Microsoft last year, said Nokia had replaced key sales executives, reduced inventories in China, revamped its phone-pricing strategy and refocused its retail marketing programs to compensate for the downturn.

“The challenges we are facing during our strategic transformation manifested in a greater than expected way” during the quarter, Mr. Elop said in a statement. “However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started to have a positive impact on the underlying health of our business.”

Mr. Elop, during a conference call with analysts, reiterated that Nokia planned to sequentially introduce the first Microsoft devices this year in various national markets. He did not specify the number of phones nor the markets.

Nokia’s sales fell in all regions of the world except the Middle East and Africa during the quarter. The greatest percentage decline was in North America, where sales fell 61 percent to €88 million from €223 million a year earlier.

Ericsson shares fell sharply even as the company, which faces competition from the Chinese companies Huawei and ZTE and the French company Alcatel-Lucent, reported an increase in second-quarter profit to 3.2 billion kronor from 2 billion kronor a year earlier.

Sales at Ericsson rose 14 percent to 54.8 billion kronor from 48.0 billion kronor.

Hans Vestberg, Ericsson’s chief executive, said the company’s restructuring charge in the second quarter had been greater than expected but was part of the ongoing adjustment of its global business to meet the economic conditions.

“If you look at our numbers today, this is one of the strongest quarters of growth we’ve ever had,” Mr. Vestberg said. “We had a higher restructuring cost than expected, but we did that to improve the profitability of the company going forward.”

Mr. Vestberg said demand for mobile networking equipment remained strong globally during the quarter, especially in Russia, China, Brazil and India. Sales rose by 70 percent in Russia, 96 percent in China, 17 percent in Brazil and 107 percent in India, as operators built high-speed mobile broadband networks for growing populations.

Sales of networking equipment in North America fell 6 percent in the quarter, which Mr. Vestberg attributed to the appreciation of the Swedish currency against the dollar.

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Google, a Giant in Mobile Search, Seeks New Ways to Make It Pay

But there was a problem: searching on a phone was less than ideal. It was hard to type on small screens. And most irritating for Google, which brags about its speed on every page of search results, was that Web pages were slow to load on phones.

So Google started a project it code-named Grand Prix. In six weeks, engineers revamped mobile searching and hatched plans for new ways to search on the go, by talking or taking photos instead of typing.

The stakes were high. Mobile phones could be a huge new market for Google. Or they could provide an opening for a competitor to pounce, or obviate the need for a search engine altogether. If people on phones could go straight to apps for information, why Google anything?

Today, Google says mobile searches are growing as quickly as Web searches were at the same stage in the company’s early days, and they are up sixfold in the last two years. Google has a market share of 97 percent for mobile searches, according to StatCounter, which tracks Web use.

Now that it dominates the field, Google is throwing its burly computing power and heaps of data at new problems specific to mobile phones — like translating phone calls on the fly and recognizing photos of things like plants and items of clothing.

“I feel like a parent the second time around feels,” said Amit Singhal, a Google fellow who works on search. “You saw your first child grow at an amazing pace, and here we are with our second child, mobile, growing at the same pace and showing the same signs.”

Google has been slow to seize some newer Web business opportunities, most notably social networking. Investors have criticized the company for dragging its feet when it comes to figuring out how to make money in new fields.

But mobile is an exception. Last year, Eric E. Schmidt, then the company’s chief executive, said Google’s philosophy was “mobile first,” meaning it would build products for phones at the same time as versions for PCs.

“This is the place that Google is essentially betting its future on,” said Karim Temsamani, Google’s head of mobile advertising, a role created in September.

Still, Google has not consistently followed the mobile-first mantra, and some analysts, including Colin W. Gillis of BGC Partners, say it has not moved quickly enough to create new mobile products or ads.

“They’ve done a really good job of positioning themselves so they can’t get boxed out of the market,” Mr. Gillis said. “Now they just need to deliver some innovation. Let’s wring some revenue out of this platform.”

Google said in October that mobile ads were on track to generate $1 billion in revenue in the coming year. Mobile users can call a business from within a Google ad or receive coupons for nearby stores. They can take cellphone photos of movie posters to pull up a trailer. With new technologies like near-field communication, advertisers could reward customers with loyalty gifts for walking into stores, Mr. Temsamani said.

But because mobile ads generally sell for less than half the price of Web ads, Mr. Gillis said, “there’s just not a lot of profit left over.” Though Google makes Android software for phones, it does not make money from it directly because it gives it away to phone makers. Meanwhile, Apple makes money from its devices and from what appears on their screens, including its own ad network.

Still, the company’s approach to the mobile market is classic Google: take problems that computer scientists have been working on for decades, throw huge amounts of data and computing power at them and assume that if the resulting product is useful to people, it will eventually make money.

People can now snap photos of landmarks or wine labels to search for them using Google Goggles, speak to their phones using voice search and, on Android phones, translate spoken conversations between English and Spanish.

“We as an academic community would have figured this out, but we wouldn’t have been able to set it up on this kind of scale,” said Alexei A. Efros, an associate professor in computer science and robotics at Carnegie Mellon, referring to these kinds of technological feats. “That’s really the great thing about Google, the fact that it can do it on such a humongous scale and actually make it useful to the general public.”

Google trained its computers to learn spoken language based on troves of voice recordings. “Even if you’re from Brooklyn and you drop all your R’s when you park your car, it’s heard plenty of people from Brooklyn and it can do well,” said Mike Cohen, head of Google’s speech technology team.

At first, Google engineers thought people would talk to its voice search service as if they were talking to a person — “you know, it’s my anniversary, and I’d love to take my wife somewhere really romantic to eat, do you have any ideas?” — so it taught the service to filter out unnecessary words. But it turned out that Google had already trained people into thinking in keywords, so they knew to search “romantic restaurants” even when speaking instead of typing.

Goggles, the visual search tool, recognizes things that have strong visual textures, like a bar code, book cover or landmark. But it often can’t distinguish between a black cat and a black chair, for instance, or recognize food or plants, though Google is working with botanists to teach its machines the secrets of leaf-spotting. Google already has the capability to recognize faces, so people could theoretically snap a photo of a blind date and pull up an online profile, but it is not yet using that technology because it is still working out the privacy implications.

People can also snap a photo to translate a menu in a foreign country, and speak English to hear the Spanish translation. Someday Google hopes to be able to translate both sides of a phone conversation as it happens, said Franz Och, head of Google’s machine translation group.

Though the search results Google spits out might seem the same on phones as on computers, there are some behind-the-scenes differences.

For example, certain search results are ranked differently, with location factored in. Search for Wal-Mart on a computer and Google suspects you are probably looking for the e-commerce site or job openings. Search on a phone and Google assumes you are looking for the nearest store. Other search tools were built specifically for phones. Search for weather or stock prices and Google shows a scale, movable with a finger, to see results for different times.

Google says mobile search is not stealing time from computer searches. Instead, mobile searches spike during the lunch hour and evenings, when people are away from their computers. And while mobile users do search for simple things like weather and train times, engineers have been surprised at how many people also ask more complicated questions about business and politics.

“Mobile search is definitely going to surpass desktop search,” said Scott B. Huffman, who works on mobile search at Google and leads its search evaluation team. “The lines will pass, and I think they’ll pass before anyone thought they would.”

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