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Facebook profits soar on strong mobile ad growth

Facebook (FB) is quickly erasing any lingering doubts about its business model, with the social networking giant recording a big jump in sales and profits.

After markets closed on Wednesday Facebook reported first-quarter revenue of $2.5 billion, up a hefty 67 percent over the same period last year. Analysts expected sales of $2.4 billion. Facebook's net income also surged to $639 million, almost triple the $217 million in profit a year ago.

The company's stock was up 3 percent in extended trading, to $62.96.

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"We've made some long term bets on the future while staying focused on executing and improving our core products and business," CEO Mark Zuckerberg in a statement. "We're in great position to continue making progress towards our mission."

There was much for investors to applaud. Monthly active users at Facebook were up 15 percent year over year, but daily users -- a better measure of those committed to the platform -- were up 21 percent. Mobile daily active users jumped by 43 percent.

Facebook is also making major strides in the increasingly important business of selling ads that run on smartphones, tablets and other mobile devices. Mobile ads accounted for 59 percent of total ad revenue in the period, up from 30 percent a year ago.

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If Facebook has shown that it can profit from the burgeoning mobile sector, sustaining that momentum will be tricky. Companies like Google (GOOG) have found that mobile ads are seeing downward pricing pressures. It may be that the increase in mobile users masks any impact on the price per ad.

Another source of pressure comes from Facebook's recent acquisition spree. It isn't unusual for tech companies to acquire small firms, particularly as a way to obtain talent and innovation. Facebook is now mature enough as company that it looks to startups as a way to invest in social media and the Internet.

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One concern is the vast sums that Facebook is spending on deals, including $1.1 billion for photo-sharing site Instagram, $2 billion for virtual reality company Oculus VR and a whopping $19 billion for mobile instant-messaging firm WhatsApp.

Unlike some large competitors, Facebook has a relatively limited amount of cash on hand. Such a level of investing, easily matched by Google, will require significant growth -- and some real return on the investments -- to sustain.

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