Facebook (NASDAQ:FB) announced quarterly results that beat expectations for both revenue and earnings. The company simply didn't see the same level of seasonality that plagues most consumer companies coming out of the Christmas season. Adobe's Social Intelligence Report gave a bit of a preview, which indicated, among other things, that ad impressions were up over the fourth-quarter. What changed and can it continue? Can Facebook maintain its lead as companies like Google (NASDAQ:GOOG) and LinkedIn try to create social networks out of their established customer bases?

Reduced seasonality drove 40% earnings upside
Facebook announced revenue of $2.5 billion, $150 million ahead of the $2.35 billion consensus, and earnings per share of $0.34 versus $0.24. The numbers look great and are driven partly by both decreased seasonality and a lower tax burden than prior quarters. Last year, Facebook saw revenue drop by 8% as it moved from the fourth quarter into the first quarter, and this year the drop was only 3%. This could be a sign that advertisers are starting to make choices about which social media sites will receive the bulk of their ad dollars.

While there have been headlines about companies pulling advertising away from Facebook, those instances are most likely industry-dependent. For example, Priceline may benefit more from TripAdvisor and Google than from Facebook. However, the reverse may be true for readily accessible retail products that can be ordered online or easily purchased in stores.

Adobe gave advanced warning
Adobe offers online advertising campaign management products and services, then aggregates that data and publishes reports on the conclusions. The Social Intelligence report is geared toward advertisers, rather than investors, but can highlight outlying data points that prove unique and interesting. The reduced seasonality in the past quarter is a good example.

Facebook, like Google, provides a simple and free service that is difficult for new competitors to compete with. Facebook already has all of your friends and family readily accessible on the site, and Google offers both the best search engine and free access to video content through YouTube. There just isn't a reason to visit other web properties to get access to these services, which presents a huge barrier to entry for competitors. As long as advertisers can ring the register from advertising on these sites, the cash flow stream will continue.

The model is changing from growing the subscriber base to monetizing it
The key issue for Facebook is to keep people returning to the site. Visits are captured in the Daily and Monthly Active User metrics, which are now at an eye-popping 1.28 billion, driven higher by Asia and the rest of the world. The table below shows the geographic breakdown of Facebook's millions of visitors. It's now at a point where the user base isn't growing as fast in established markets, so the opportunity turns from growth to monetization.

New Subscribers by Location







Asia and the rest of the world






U.S., Canada, and Europe






Source: Company press releases

Google and other advertising services providers have been jealously eyeing Facebook's tremendous subscriber base and continue trying to chip away at it. In October 2013, Google counted 300 million monthly active users, but the amount of time that visitors spent on the site was considerably less, a total of seven minutes per month. The site has been available to all users over age 18 since September 2011, but Facebook's 10-year head start and complete focus has generated a lead that will be difficult, it not impossible, for potential competitors to overcome.

Foolish final thoughts
The big takeaway from this earnings report is that profits can continue to accelerate, even as the top line slows. As Facebook builds out new products, like the ad network, the 1.28 billion people coming to its web site each month become more valuable.