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Facebook Courts Small Businesses to Drive Mobile Ad Revenue

Facebook Courts Small Businesses to Drive Mobile Ad Revenue
Image credit: Ben Margot, AP

It is often said that small businesses are the backbone of a healthy economy. The same might soon be said of their importance to Facebook's revenue.

Facebook's second-quarter earnings beat analyst expectations, registering a profit of $333 million on revenue of $1.8 billion, up 53 percent from one year ago. Much of that revenue growth came from a dramatic increase in sales of mobile advertisements, which accounted for 41 percent of the company's $1.6 billion in ad revenue in the second quarter.

Mobile traffic was up as well, with 819 million users accessing Facebook from a smartphone or tablet. That represented an increase of 51 percent from the second quarter of 2012.

As mobile grows, small businesses are steadily buying a larger share of ads, Facebook said. In the second quarter, Facebook surpassed one million active advertisers on its platform, many of whom are local businesses. This is no coincidence; Facebook has reportedly been wooing small-business owners as of late as it seeks to compete with Foursquare and other companies whose apps help users interact with businesses in their area.

Facebook's stock shot up 17 percent in after-hours trading on Wednesday. It has continued to gain since the market opened Thursday, now trading near $33 a share. While still shy of the initial $38 share price at its IPO over one year ago, investors finally have reason to feel good about its prospects.

Related: How to Use Targeted Advertising on Facebook and AdWords (Video)

Brian Patrick Eha is a freelance journalist and former assistant editor at Entrepreneur.com. He is writing a book about the global phenomenon of Bitcoin for Portfolio, an imprint of Penguin Random House. It will be published in 2015.

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