Facebook's era of rapid advertising growth is over: ad revenue growth may slow next year
Beijing time on November 3rd morning news FacebookSales set another new record in the third quarter, but the boom may be over.
In a post-earnings conference call Wednesday, David Wehner, Facebook's chief financial officer, said investors were alarmed by a "radical investment plan" despite the expected slowdown in sales growth in 2017.
"We expect a significant slowdown in ad revenue growth (in 2017)," Weiner said.
The reason: Facebook expects growth in "ad load" (that is, the number of ads displayed to users) to slow.
In the third quarter, Facebook's revenue surged to $7 billion, up 59 percent from a year earlier. In fact, Facebook's sales for the quarter were almost as much as the total revenue in 2013.
Facebook's remarkable sales growth is due to its successful advertising sales on smartphones and tablets. Mobile advertising now accounts for 84% of Facebook's overall ad revenue, which was close to zero in mid-2012.
However, sales growth depends on Facebook's ability to place more and more ads in its posts and charge them more. Now, the company wants to let investors know that it may not be able to add more ads.
Facebook's stock has been strong for months, and the company's shares fell 7 percent just hours after Mr. Wiener's comments.
As early as July, Weiner made similar comments about the slowdown in Facebook's ad-carrying growth.
"Because ad carrying is one of the main factors in our recent strong revenue growth, we expect revenue growth to be affected accordingly," he said at the time. "
This time, however, Mr Wiener went further, saying growth in advertising sales would fall "significantly".
The disturbing comments and investors' responsiveness contrasted sharply with the company's strong third-quarter earnings growth.
As the world's largest social network, Facebook had 1.79 billion monthly active users at the end of the third quarter, compared with 1.55 billion a year earlier, the data showed. With 3.2 billion residents in the Internet world, Facebook already accounts for half of the total.
Wall Street used to think of the mobile business as Facebook's Achilles heel, because the site was originally designed for desktop computers. Now it seems that Facebook already has a billion monthly users who use only their mobile phones, and millions of businesses are eager to win over them with advertising.
For Faceb, however, the most pressing concern may be how much room left to squeeze ads into social networks to sustain incredible sales growth.
Facebook has quickly built up a network of collaborations covering other services, and has attracted a billion users, hoping to start making money. The list includes Facebook Messenger and WhatsApp, both of which can be profited from interactive ads between businesses and customers.
In addition, Instagram recently passed the $500 million mark, and the advertising business is starting to heat up. This week, Instagram also announced plans to make it easier for users to buy items on its platform.
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