Facebook Reports Big Profits on Growing Mobile, Internet.org Use
The number of people around the world using Facebook daily is approaching 1.2 billion, with mobile users accounting for a large share of traffic growth, according to the company's third quarter financial results, announced yesterday.
Ad revenues jumped dramatically -- 59 percent over 2015 figures -- although chief financial officer David Wehner cautioned that growth is likely to "come down meaningfully" after mid-2017.
Overall, Facebook reported total revenues of just over $7 billion for the quarter that ended Sept. 30. Wehner noted the company is planning "aggressive" investments for next year, including ongoing data center expansion, as it pursues its long-term roadmap for continued growth.
Going forward, Facebook will continue to focus on three priorities: making the most of the growing number of mobile users, increasing the advertiser base and "making our ads more relevant and effective," chief operating officer Sheryl Sandberg said in yesterday's earnings call.
Video Becoming More Important
Video is another area where Facebook is banking on continued growth, CEO Mark Zuckerberg said. While the social networking site has supported live video streaming since mid-2015, an update in April of this year boosted the service's capabilities with a new API and an improved mobile app.
"People are creating and sharing more video, and we think it's pretty clear that video is only going to become more important," Zuckerberg said during the call. "So that's why we're prioritizing putting video first across our family of apps and taking steps to make it even easier for people to express themselves in richer ways."
Facebook-owned Instagram also moved deeper into video this past quarter with the launch of Instagram Stories that resemble the photo- and video-sharing capabilities of Snapchat Stories.
In a post on his personal Facebook page, Zuckerberg said the number of Facebook Live users has grown four times since May, while Instagram Stories' daily user base now exceeds 100 million. He added that Facebook is currently building a new camera tool to work across its apps and will be adding even more visual messaging tools over the next few months.
The Challenge: Sustaining Ad Growth
During the earnings call, Zuckerberg also highlighted the company's growing base on Internet.org, a Facebook initiative to bring more of the world's unconnected people online, and Express Wifi, an Internet.org program that teams up with entrepreneurs in underserved areas to expand local connectivity. Some 40 million people around the world now access the Internet through Internet.org and Express Wifi is "making good progress," he said.
Despite Facebook's notable increases in earnings and users, the company's stock price dropped after yesterday's call due to concerns about the sustainability of its ad revenue growth. A number of observers on Twitter pointed to the difference in Wehner's characterization of future ad earnings between the second quarter, when he said growth would slow "accordingly," to this past quarter, where he predicted next year's ad growth rates would likely "come down meaningfully."
Sandberg reported yesterday that Facebook had more than 4 million active advertisers in the third quarter of this year, with another half-million on Instagram. Growing that base further will require the company to make it easier for advertisers to manage campaigns from mobile devices and add new mobile ad tools for businesses in emerging markets, she added.
"Our third priority is making ads more relevant and effective," Sandberg said. "Our goal is to be the number one driver of growth for our clients. With only a small fraction of businesses on Facebook and Instagram advertising, we have a lot of opportunity in front of us."
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