* Advertising revenue up 36 percent
* Monthly active users top 1 billion, of which 604 million were mobile
* Zuckerberg not pleased with gaming revenue
* Shares up 11 percent
By Alexei Oreskovic
SAN FRANCISCO, Oct 23 (Reuters) - Facebook Inc grew mobile advertising revenue several times in the third quarter, a faster-than expected pace that helped reassure investors that the world's No. 1 social network is beginning to figure out how to earn money off smartphone and tablet users.
The company now gets 14 percent of its advertising revenue from mobile ads, translating into more than $150 million -- a surge from an estimated $40 million to $50 million in the second quarter and almost nothing in the first.
Mark Zuckerberg, the 28-year-old chief executive who created Facebook in his Harvard dorm room, said mobile was the "most misunderstood aspect" of the company.
"I want to dispel this myth that Facebook can't make money on mobile," he told analysts on a conference call.
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. As its users increasingly access the social network with their smartphones, Facebook has struggled to transition its business to mobile devices.
"They beat on the top line. They are talking about 60 percent of users on mobile. They are monetizing this OK," said Wedbush Securities analyst Michael Pachter.
"Fourteen percent of total ad revenue is not chump change and some people were talking like it was zero. It's not bad monetization and a lot better than expected," he said.
The company's shares leapt 11 percent to $21.60 in after-hours trading on Tuesday.
Overall, Facebook posted a 32 percent jump in third-quarter revenue to $1.26 billion, as the company reignited advertising growth with the help of larger-than-expected gains in mobile.
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.
"Advertising revenue from mobile was the number that really stood out," said Sterne, Agee & Leach analyst Arvind Bhatia. "They are saying mobile ad revenue was 14 percent of total ad revenue. That would be about $140 million and I was expecting $40 or $50 million from this."
Zuckerberg admitted he was not pleased with revenue from gaming. Longtime partner Zynga Inc has been shedding users and fighting revenue losses, and now accounts for about 7 percent of Facebook's revenue, down from about 10 percent previously.
"The interesting thing is that the rest of the games ecosystem has actually been growing. Our monthly payments revenue from the rest of the ecosystem increased 40 percent over the past year, since payments has been adopted," he said.
Facebook said it had crossed the 1 billion threshold for monthly active users by Sept. 30, of which 604 million were mobile users, a gain of 61 percent from a year earlier.
"We're really focused on accelerating the adoption of ads into mobile so we have been introducing more ads into the feed of different types," Facebook Chief Operating Officer Sheryl Sandberg told Reuters in an interview on Tuesday.
Third-quarter mobile revenue marked a big jump from the second quarter, when Facebook said that it was generating more than $1 million a day from the new class of ads, which appear in users' newsfeeds. Facebook said that roughly half of that revenue was from mobile ads, suggesting that mobile advertising revenue totaled $45 million in the second quarter.
The world's No.1 online social network company posted a net loss of $59 million, or 2 cents a share, in the three months ended Sept. 30. It had a profit of $227 million or 10 cents a share a year earlier.
Excluding certain items, Facebook said it earned 12 cents a share, a penny higher than the average analyst expectation.
Its third-quarter revenue surpassed the average analyst expectation of $1.23 billion, according to Thomson Reuters I/B/E/S.