Facebook's Q4 Revenue Better Than Expected, Mobile Advertising Growth Provides A Welcome Boost

Facebook received an early birthday present in the late hours of Wednesday night after it was revealed the social networking site had beaten its revenue expectations, driven by greater use of mobile advertisements.

The site, which has its nine birthday on Monday 4 February, announced its fourth-quarter revenue reached $1.59 billion (£1.01bn), with profits topping $64m (£40.5m) - the profit figure represents a drop of 79% compared to the previous year's Q4, but the revenue is remarkably better than analysts had been expecting.

The final quarter of 2011 had been skewed by Facebook's run up to the site's $104bn (£65bn) flotation last May. The initial public offering (IPO) turned disastrous by the autumn, with share prices falling below $19 - half of the price they were initially sold for.

Despite Wednesday's unexpected good news, shares only enjoyed a brief rise, before falling in after hours trading. Analysts believe this is because mobile advertising, while showing positive numbers, comes at a higher cost.

The fourth quarter was the first in Facebook's history when more of 1.06bn users logged on with mobile devices rather than traditional PC, bringing in 23% of advertising revenue, compared with 14% in the third quarter.

Founder Mark Zuckerberg also made much out of the new Graph Search feature – allowing Facebook users find things such as restaurants or airlines that their friends, or friends of friends, like – saying it could "potentially turn into a meaningful business for us".

Could this be construed as a challenge to Google? Many think so, but as the Guardian's tech editor pointed out, Google already has a head start in making money out of mobile with its Android platform using maps and locations data to improve advertising.

Facebook's endured an uncomfortable 2012 - problems with its share price aside, it also came in for criticism because of the amount of corporation tax it pays in the UK.

Facebook uses its Irish subsidiary, which is the group's overseas headquarters, to sidestep tax authorities in the UK and other major markets in similar legal tactics used by Google and Apple, meaning it paid less than £240,000 in Britain in 2011.