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Facebook's Blowout Earnings Are Even More Impressive Than You Thought

Updated from 10:28 a.m. to include comments from Topeka Capital Markets analyst in the twelfth paragraph.

NEW YORK (TheStreet) –– The biggest takeaway from Facebook's (FB - Get Report) earnings is that its mobile advertising efforts are much stronger than anticipated, allowing it to generate margins other companies could only hope to dream about.

Facebook's margins on earnings before interest taxes, depreciation and amortization, or EBITDA, were 67.7%, significantly higher than what Wall Street was expecting, as the company's mobile ads are simply more effective than anything else out there right now. On the earnings call, COO Sheryl Sandberg said it's not just mobile app install ads that are driving the results; it's everything.

"Our mobile ads revenue is pretty, it's broad based," Sandberg said on the earnings call. She noted that the company has not only large brand advertisers, but small businesses, direct response advertisers, as well as developers using mobile ads. Sandberg did note that mobile app install ads "remain a good part of our mobile ads revenue and we're excited about the opportunities there," but it's clear that the company is focusing on more than just installing apps, be it from developers or corporations.

The company's margin expansion continues to be the envy of all Internet advertisers, and was a standout point for Jefferies analyst Brian Pitz, who boosted his price target to $100. "FB posted solid top-line beat but it was the margin expansion that stood out," Pitz wrote in a note. "We note it is impressive FB is delivering this kind of growth without any meaningful contribution from promising go-forward growth levers like Instagram or video ads."

"Facebook has become a more popular destination for advertisers to utilize their paid advertising spends," said Ken Wisnefski, CEO of Internet Marketing company WebiMax via email. "A lot of our clients have shifted portions of their ad spend away from Google's paid search programs into Facebook's paid advertising units. This is based largely on two factors, the ability that Facebook has to drill down and target their core demographic because of the large amount of data that Facebook possesses about its users, and the fact that their ad units are still much lower priced than the costs driving Google's paid search units."

For the second-quarter, Facebook earned 42 cents a share on $2.91 billion in revenue, as revenue from advertising was $2.68 billion, a 67% increase year over year. Mobile advertising revenue rose rose 41% year over year, accounting for 62% of total advertising sales, coming in at $1.66 billion. Payments and other fees revenue was $234 million, a 9% increase from the same quarter last year.

Analysts surveyed by Thomson Reuters expect Facebook to earn 32 cents a share on $2.81 billion in revenue.

At the end of the quarter, Menlo Park, Calif.-based Facebook had 829 million daily active users (DAUs), an increase of 19% year-over-year, while mobile DAUs rose 39% year over year to 654 million. The company ended the quarter with 1.32 billion monthly active users (MAUs), including 1.07 billion mobile MAUs.

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