Facebook’s Profit Rises Amidst Growth Concerns

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Facebook’s Profit Rises Amidst Growth Concerns

This year, Facebook Inc. is expected to rake in $27 billion in revenue and is currently defying the principle that an increase in size usually leads to a slowdown in growth. On Wednesday, the social media giant announced that its revenue in the third quarter had increased by 56% to reach $7 billion. In addition, the quarterly Facebook’s profit had also tripled as it came about $2.38 billion. The social network is reaping the rewards of the dominance it is currently enjoying in mobile advertising. The top-line growth of the company is double than that of any other US company that has revenue worth $20 billion or more. This excludes companies that are growing via acquisitions.

However, Facebook has also said that it is not possible for the company to continue maintaining its current pace. Beginning from the second half of 2017, the social network will stop showing more ads to users in their news feed. The company has been using this tactic for the past two years for juicing its revenue growth. Dave Wehner, the Chief Financial Officer said that this move is undoubtedly going to bring down their advertising revenue. He said that going forward, Facebook was expecting a much smaller contribution from this sector.

He asserted that the company plans to power growth by increasing its user base and boosting the amount of time spent by these users on the social network. Video has become crucial for this strategy. Analysts have also said that the growth rate is bound to slow because it is not practically possible for any company to continue growing at the same rate. The stock price of the company was down by nearly 7% due to the caution it issued about advertising growth. It is also in the firm’s plans to spend more on hiring engineers and building data centers next year.

The growth of the social network has outstripped the sole competitor in online advertising, Google’s parent Alphabet Inc. Last week, Google had announced that their quarterly revenue had grown by 20%. Together, Google and Facebook accumulated 68% of the US spending on online advertisements in the second quarter, which means they account for all the growth. If the two companies are excluded, the revenue earned by other companies in the US digital ad market saw a decline of 5%. Experts have said that the dominance of two companies in the market is a cause for concern.

Statistics reveal that almost half of the advertising bought online in the first half of the year could be accounted to mobile. Compared to the first six months of 2015, mobile ads also grew at a faster rate than any other category. When Facebook shifted its focus towards its mobile app in 2012, it gave the company the opportunity to tap into a huge market of businesses that were eager to spread the word. In the third quarter, 84% of the advertising revenue earned by Facebook was from mobile advertising, which is an increase from the previous year.               

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Hassan is a Blogger, Author, Entrepreneur and the Administrator of OnzineArticles.com. He heads Burgeoning Technologies, a Web and IT Company and manages several other blogs and websites. He can be followed on , Twitter and Facebook.

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