Facebook's Ads Can't Keep Up with Its Mobile Growth

The social network's latest earnings report shows why a lot of good is never enough for Facebook, especially when it comes to making money off you and your cellphone.

A lot of good is never enough for the world's biggest social network, especially when it comes to making money off you and your cellphone. Facebook's latest earnings report was filled with positive signs, among them $1.59 billion in total revenue and an increase in the ever important category of mobile advertising revenue — including $1.33 billion coming from phone ads alone. Daily active users and monthly active users were up, too, coming in at 1.06 billion and 618 million, respectively. But just after Facebook's report dropped, the company's stock was down in after-hours trading, from 10 percent to 5 percent to 3 percent to, well, now it seems to have leveled off.

Stil, that negative gut reaction from investors might have to do with a few things. Facebook barely beat analyst expectations, which might have Wall Street a little worried. But the company also spent a ton of money — costs and expenses rose by 82 percent year-over-year. Facebook almost doubled its research and development spending to $1.4 billion in 2012, from $860 million the year before.

Or maybe the overreaction on the Street has to do with the reality that Facebook's mobile ads just aren't making enough money and fast enough. Facebook has seen a gigant a huge shift to smartphone-only users: In the fourth quarter of last year, more people visited the social network on their phones than they did on their computers. And despite making more money than ever off those people, Facebook would make a lot more if those people stayed on their laptops. It appeared that Wall Street was relenting as Facebook's 5 p.m. earnings call approached, but it also appears that Facebook needs to figure out how to better monetize its rapidly growing mobile userbase.