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Facebook reaches 1 billion daily users in third quarter

Aaron Pressman

Revenue and profits at Facebook (FB) beat Wall Street's expectations for the third quarter, as for the first time, more than 1 billion people a day on average used the massive social network. Facebook shares jumped as much as 5% in after-hours trading.

Revenue at Facebook totaled $4.5 billion, up 41% from a year earlier and more than the $4.37 billion Wall Street analysts expected. Adjusted earnings per share hit 57 cents, up from 43 cents a year ago and better than the 52 cents Wall Street forecasted.

The company said its daily active users worldwide reached an average of 1 billion in September, 17% more than a year ago and the first time the closely watched metric notched that level. Almost 1.6 billion people used Facebook at least monthly, the company said.

Facebook has been growing both by adding more users around the world and by charging more for advertisements, especially video ads. CEO Mark Zuckerberg said more than 500 million people watch an average of 8 billion videos per day on Facebook. More than 400 million people per month are using Facebook's photo sharing service Instagram, over 700 million use the company's Messenger app monthly and 900 million use the Whatsapp service, Zuckerberg said.

The company said it collected $9.86 in ad revenue per U.S. user in the quarter, up 48% from a year earlier. The number of monthly active U.S. users reached 217 million, up 5%.

In emerging markets, ad rates aren't growing as quickly, but user growth is faster. In the Asia Pacific region, for example, ad rates rose only 21% to $1.36 per user. But the number of monthly active users increased 23% to 522 million.

To some degree, Facebook is growing for different reasons than its leading competitor for online ads, Alphabet's (GOOGL) Google. At Facebook, the company showed 10% fewer ads in the third quarter but charged 61% more per ad, CFO David Wehner said. At Google, there were 23% more clicks on ads last quarter but the ad revenue per click declined by 11%.

As fast as Facebook's revenue increased, expenses rose even more quickly. Total costs and expenses hit $3.04 billion, up 68% from a year ago.

Some of those costs are for projects that may not generate much revenue for a long time, such as Facebook's virtual reality unit, Oculus VR. "These kinds of new platforms take a long time to develop," Zuckerberg warned on a call with analysts.

Shares of Facebook were up 33% so far this year before the earnings announcement, hitting an all-time intraday high of $105.12 last week. In after hours trading on Wednesday, the shares spiked above $108.