Facebook astonishes Wall Street

Facebook has shocked Wall Street by making a surprise amount of money from its mobile advertising arm.

Facebook said that its mobile advertising revenue grew several times in the third quarter. Company share values increased by 13 percent on the back of the news.

The figures mean that Facebook gets 14 percent of its advertising revenue from mobile ads. The hope is that this will reassure investors that the social network is beginning to figure out how to earn money off smartphone and tablet users.

But the actual cash is still quite small. Mobile ad revenues were roughly $150 million, up from an estimated $40 million to $50 million in the second quarter and almost nothing in the first. So this is good, but no cigar yet.

Reuters claims that this dispels the most bearish view, that Facebook couldn’t make money on phones or tablets. But it is not clear if this is really the case.

While the company has managed to generate decent revenues form their mobile applications, it is still a long way from having mobile ads command the same rates as its traditional ads.

There is still no proof that Facebook is worth more than a chocolate teapot when it comes to marketing. But mobile advertising has been among the key investor concerns hanging over Facebook, helping slash more than $40 billion off its market value since its May IPO. Well, that and the fact that the company was hugely over valued. Even with yesterday’s gains, you can pick up a Facebook share for $21.97.

Facebook’s other figures show promise. Advertising revenue increased 36 percent to $1.09 billion, up from 28 percent growth in the second quarter. But revenue from its payments and other businesses increased just 13 percent to $176 million.

The figures are better than expected, but Facebook’s share price is still overvalued and could fall further when shareholders are allowed to actually sell them. This is expected to happen later this year. We still think the company share price will settle around $13 to $14 a share.