Weekly New/Digital Media (70)
Facebook shares dip from high as investors fret over costs, future profit
Summary:"The world’s biggest online social network is searching for new advertising features to supplement main revenue streams that it expects to cool off this year"
"Facebook reported surging quarterly profit and revenue on Wednesday, helped by its fast-growing mobile ad business. But its shares dipped from a record high in after-hours trading as investors showed some nervousness about future earnings."
Earlier in the day, Zuckerberg said the company would add 3,000 people over the next year to monitor and remove images of murders, suicides and other inappropriate material from its network, which have become a threat to Facebook’s valuable public image.
Key facts/statistics:
- Facebook’s shares fell 2.4% in after-hours trading to $148.12. They had closed at an all-time high of $153.60 on Tuesday.
- The company’s chief financial officer, David Wehner, said on a conference call after the company’s earnings announcement that ad revenue growth was expected to come down significantly over the rest of 2017, repeating prior company warnings that it was hitting a limit in “ad load”, or the number of ads it can squeeze onto users’ pages before upsetting them.
- New products, such as ads that play in the middle of videos or appear on Facebook’s Messenger app, could fuel growth, but Wehner and the company’s CEO, Mark Zuckerberg, said on Wednesday those plans were still in early stages.
- At the same time, the company said expenses would continue at a high level, growing 40% to 50% this year over 2016 levels and putting a squeeze on future profits.
- Facebook said quarterly profit in the first three months of 2017 rose 76.6% year-over-year to $3.06bn and total revenue went up 49% to $8.03bn.
- The company is expected to generate $31.94bn in mobile ad revenue globally in 2017, up 42.1% from a year earlier, according to research firm eMarketer.
- That would give Facebook a 22.6% share of the worldwide mobile ad market, with its arch-rival, Google, of Alphabet projected to be the leader with a 35.1% share, according to eMarketer.
- Facebook continued its march toward the 2 billion user threshold, saying it had some 1.94 billion people using its service monthly as of 31 March. That was up 17% from a year earlier.
- Analysts on average had expected monthly active users of 1.91 billion, according to the financial data and analytics firm FactSet.
- Net income attributable to Facebook shareholders rose to $3.06bn, or $1.04 per share, in the first quarter from $1.73bn, or 60 cents per share, a year earlier.
- Mobile ad revenue accounted for about 85% of the company’s total advertising revenue of $7.86bn in the first quarter ended 31 March, compared with about 82% a year earlier.
- Analysts on average had expected total ad revenue of $7.68bn, according to FactSet.
It seems to be a result of traditional media platforms targeting facebook and revealing just how much audiences SHOULD be bothered by the adverts they recive on the platform. So now a few audiences would be upset, especially those that read the gurdian. This therefore highlights the pressure facebook may feel in regards to ad revenues vs their shares (opportunity cost) and a careful choice has to be made or else it could really damage their market share which may already be struggling due to the increasingly negative brand image that seems to be occurring due to things such as a lack of regulation and censorship of extremely upsetting content. They need to be careful in focusing on and perfecting certain advances rather than contentiously taking on more - they might be biting more than they can chew. I think Google does a better job at handling their PR and shares than facebook.
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