Facebook Inc warned on Tuesday of a dramatic increase in spending in 2015 and projected a slowdown in revenue growth this quarter, slicing a tenth off its market value.<\/p>\n
The hefty spending plans exposed the first signs of stress in the rock-solid support that investors have accorded the social networking company over the past year.<\/p>\n
With Facebook’s mobile advertising business delivering repeated quarters of breakneck revenue growth, the company has faced little pushback from investors on pricey, multi-billion dollar acquisitions such as WhatsApp and Oculus. Shares of Facebook reached an all-time high of $81.16 on Tuesday, before the company reported its third-quarter results.<\/p>\n
Chief Financial Officer Dave Wehner told analysts on a conference call that the social network is preparing for a 55 percent to 75 percent spike in expenses next year, when the world’s largest social network intends to invest in Whatsapp, Oculus and other products that have yet to show a profit.<\/p>\n
That’s a big change from the company’s current spending patterns, with costs and expenses in the first nine months of 2013 up a relatively modest 32 percent. Facebook declined to provide any estimates for its expected pace of revenue growth in 2015, adding to investor worries.<\/p>\n
“Giving expense guidance without giving revenue guidance is frustrating and spooking The Street,” said BTIG analyst Richard Greenfield.<\/p>\n
“The multi-billion dollar question is what\u2019s revenue growth going to look like next year,” he said.<\/p>\n
Wehner forecast revenue growth of 40 percent to 47 percent in the final quarter of 2014. That’s down sharply from 59 percent in the third quarter.<\/p>\n
The financial forecasts came on the same day as Facebook revealed hundreds of millions of dollars in losses from WhatsApp.<\/p>\n
Facebook Chief Executive Mark Zuckerberg has told Wall Street he is in no hurry to extract a payoff from the collection of acquired products, stressing the importance of growing the number of users first.<\/p>\n
“For us products don\u2019t get that interesting until they have about a billion people using them,” Zuckerberg said.<\/p>\n
Shares of Facebook, up roughly 47 percent this year, slid nearly 9 percent to $73.80 in extended trading on Tuesday.<\/p>\n
Facebook reported a better-than-expected 59 percent jump in third-quarter revenue and a solid gain in its user base that’s already the world’s largest social media community. The company is considered a pioneer in mobile advertising, outshining rivals like Twitter Inc, which are struggling to sustain user engagement and growth.<\/p>\n
Google Inc, the world’s No.1 Internet search engine, has seen its advertising rates stuck in a multi-year decline as it adapts its lucrative advertising business for the smartphones that consumers increasingly favor.<\/p>\n
Mobile ads represented two-thirds of Facebook’s advertising revenue in the third quarter, and the company said that the average price of its ads more than tripled year-on-year.<\/p>\n
“They continue to show that there is a lot of demand for their product, both in terms of users wanting to spend time there and advertisers wanting to spend money,” said Ben Schachter an analyst with Macquarie Research.<\/p>\n
Facebook’s total number of monthly users reached 1.35 billion in the third quarter, with 64 percent of its users accessing the service every day.<\/p>\n
Facebook said revenue in the three months ended Sept. 30 totaled $3.2 billion, up 59 percent from $2.02 billion in the year-ago period. Analysts polled by Thomson Reuters I\/B\/E\/S were looking for revenue of $3.12 billion on average.<\/p>\n
Net income increased to $806 million, or 30 cents a share in the third quarter, compared to $425 million, or 17 cents a share in the year-ago period. Excluding certain items, Facebook said it earned 43 cents a share.<\/p>\n
Facebook also for the first time disclosed the financial performance for WhatsApp, a mobile messaging app that the company acquired earlier this month for $22 billion.<\/p>\n
According to a filing with the Securities and Exchange Commission on Tuesday, WhatsApp lost $232.5 million in the first six months of 2014, compared to a loss of $58.8 million in the first six months of 2013.<\/p>\n
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