How many more ads will people take? Facebook warns growth will slow

Facebook shares tumbled more than 6 per cent in US after-hours trading on Wednesday after the company warned that revenue growth would slow this quarter, offsetting strong earnings that handily beat Wall Street estimates.

In a call with analysts, Facebook Chief Financial Officer David Wehner said ad growth would likely slow "meaningfully" due to limits on "ad load," or the number of ads that Facebook can put in front of customers without alienating them.

More Business Videos

Facebook revenues rise

Facebook mobile advertising soars, lifting results, while the Fed keeps interest rates steady, and stocks lose ground.

He also said 2017 would be a year of aggressive investment that will see a substantial increase in expenses.

Facebook shares were down 6.9 per cent in after-hours trading, at $US118.45.

While the warning about the fourth quarter sent some investors running, by most metrics the company beat analysts' expectations on torrid mobile ad growth.

Mobile ads accounted for 84 per cent of Facebook's total advertising revenue of $US6.82 billion ($8.9 billion) in the third quarter that ended September 30, compared with 78 per cent a year earlier.

Advertisement

The company is also reaping the benefits of a big push into video, both on Facebook itself and on its Instagram photo app.

Facebook reported a 55.8 per cent rise in quarterly revenue, to $US7.01 billion, beating analysts' average estimate of $US6.92 billion, according to Thomson Reuters I/B/E/S.

Over a billion people access the social network through their smartphones every day. But there's a limit to how many ads ...
Over a billion people access the social network through their smartphones every day. But there's a limit to how many ads they will accept. Photo: Bloomberg

Excluding one-off items, the company earned $US1.09 per share. On that basis, analysts had expected US97¢ per share.

Facebook said about 1.79 billion people were using its site monthly as of the end of September, up 16 per cent from a year earlier.

The strong numbers come as Facebook has struggled in recent months to combat allegations that it unfairly removes certain content on its service, and news in September that the company had for years overestimated how it calculates the average time users spend watching video.

But investors appear optimistic that Facebook will continue to grow revenue through its aggressive expansion of mobile and video advertising.

More than 90 per cent of Facebook's users access the social network through mobile devices, and the company now boasts daily average mobile users of 1.09 billion, up 22 per cent from last year.

Reuters

Advertisement

0 comments