How Facebook became so profitable

The smartest insight and analysis, from all perspectives, rounded up from around the web:

"Facebook is killing it," said Julia Greenberg at Wired. In a week in which tech giants like Apple, Google, and Twitter posted surprisingly disappointing earnings, the world's biggest social network "wildly beat Wall Street's expectations," tripling its first-quarter profit compared with last year — to $1.5 billion on $5.3 billion in revenue — and sending its stock to an all-time high. Why is Facebook soaring while "its biggest rivals stumble"? Like Alphabet (née Google), Facebook spends lavishly on "moonshot ventures" like drones and virtual reality. And like Apple, it relies on a legacy product — its newsfeed — to drive the bulk of its earnings. But more than any other giant in Silicon Valley, Facebook has "skillfully transitioned" its advertisers into buying placements "where most users are likely to see them: on their phones."

"Facebook is in a class of its own," especially when it comes to mobile ads, said Tenzin Pema and Supantha Mukherjee at Reuters. The company now reaches 1.65 billion people around the world every month, and mobile advertising makes up 82 percent of the firm's total revenue, up from 73 percent last year. Our addiction to checking Facebook is making the company "astonishingly profitable," said Peter Eavis at The New York Times. Users spent an average of 17 minutes per session on the social network in March, but only nine minutes on Google, according to SimilarWeb. That lingering is what makes Facebook such an attractive place for advertisers. What's the going rate to "catch your attention as you argue with your friends and relatives over Donald Trump or coo over baby pictures"? In the first quarter alone, Facebook pulled in $11.86 in ad revenue per user in the U.S. and Canada.

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Oddly enough, Facebook may have "peaked" as a social network, said Will Oremus at Slate. People are actually sharing fewer posts about their personal lives. But the company "has been quietly yet aggressively preparing for exactly this sea change." Its $1 billion acquisition of Instagram in 2012 and the $22 billion purchase of WhatsApp two years later were "widely mocked" at the time. But now most online socializing happens in photo-sharing and messaging apps, and Facebook owns two of the biggest ones. As for Facebook proper, its content expands far beyond personal updates — to include news, video, and games — but the feed is still ranked by what you and your friends like and share. Instead of a true social network, it has become "a personalized portal to the online world."

Things are going so well that Facebook last week "announced a little present for Mark Zuckerberg," said Matt Levine at Bloomberg. The company will create a new class of common stock that allows him to maintain authority as long as he is CEO. Under the proposal, Zuckerberg will be able to give away most of his shares to philanthropic causes — as he has said he will do — without losing voting control. It will also insulate him "from any shareholder pressure to rein in his ambitions." Among those: "helping to cure all diseases by the end of this century." Crazy as it sounds, investors seem willing to follow Zuckerberg wherever he goes. So far, that strategy has made them "a lot of money."