News / Economy

Facebook's Next Growth Engines Still Warming Up

People walk past graphic on a wall at Facebook headquarters, Menlo Park, California, Jan. 29, 2013.
People walk past graphic on a wall at Facebook headquarters, Menlo Park, California, Jan. 29, 2013.
Reuters
Facebook Inc. has a message for Wall Street: Don't expect new revenue streams anytime soon.

The world's No. 1 Internet social network delivered its strongest revenue growth in several years during the first quarter, as its mobile ad business gained steam.

But even as Facebook gave investors the good news, buoying its stock by roughly 3 percent in after-hours trading, the company made it clear that other money-making efforts such as video ads and ads within its Instagram photo-sharing app would not bear fruit in the near future.

“That will probably be the most disappointing statement to come out of the call,” said Macquarie Research analyst Ben Schachter. “Many folks were anticipating a next leg of growth.”

Facebook Chief Operating Officer Sheryl Sandberg told analysts on a conference call on Wednesday that Instagram ads, video ads and a nascent mobile ad network were all still in experimental phases and that none of them would make a meaningful contribution to revenue in 2014.

That may dash the hopes of some investors, who had expected Instagram to start generating revenue two years after Facebook acquired it for $1 billion.

“We're very focused on consumer growth, and we move slowly and deliberately in monetization,” Sandberg said, referring to the limited number of ads on Instagram. “We don't see the need or the urge to ramp this as quickly as we possibly can.”

Facebook is also going slow with auto-play video ads. Facebook said earlier this year it would allow a small group of advertisers to display 15-second video ads on Facebook, but Sandberg said on Wednesday the company was still gaging users' response and was in no hurry to open the service up broadly to advertisers.

The comments are likely to cause financial analysts and investors to re-appraise Facebook's near-term prospects. In notes to investors released prior to Wednesday's earnings report, Morgan Stanley estimated that video ads could contribute $900 million to Facebook's top line this year, while Cowen & Co targeted $1 billion in video ad revenue.

Shares of Facebook remained up in after hours trading, even after the company warned that its advertising revenue growth would slow throughout the year, as it faces tougher year-on-year comparisons.

Investors are willing to give Facebook some leeway, given its strong performance building the mobile ad business, said Macquarie's Schacther.

“They've earned the benefit of the doubt, that even if it doesn't come this quarter, or the next quarter, that it will come,” he said of the company's additional revenue opportunities.

Turnaround

Facebook's newsfeed ads, which inject paid marketing messages straight into a user's stream of news and content, have ignited Facebook's revenue growth and bolstered its stock price during the past year. The ads are ideally suited for the smaller-sized screens of smartphones and other mobile devices.

Facebook said mobile ads contributed 59 percent of its ad revenue in the first quarter, up from 30 percent in the year-ago period. Facebook's overall revenue grew 72 percent year-on-year to $2.5 billion in the first quarter, above the $2.36 billion expected by analysts polled by Thomson Reuters I/B/E/S.

Facebook's first-quarter results underscore how far the company has come since its rocky 2012 initial public offering, when concerns about slowing revenue growth cut its stock price in half. At the time, investors questioned Chief Executive Mark Zuckerberg's commitment to the financial side of the business, spooked by the hoodie-wearing founder's comments about that Facebook does not build services to make money, but rather that it makes money to build better services.

Many of the key investor concerns about Facebook's ability to transition its ad business to mobile phones and a perception that consumers were cutting back their time on the social network have been dispelled, said FBN Securities analyst Shebly Seyrafi.

He noted the proportion of Facebook users who access the site daily increased to nearly 63 percent in the first quarter, up from 61.5 percent at the end of 2013.

“If you look at user growth, engagement rates and monetization, the three key levers of value, Facebook delivered on all three,” he said.

While Seyrafi said he believed Instagram has the potential to turn into a near-term money-maker, he said he was not concerned by Facebook's comments.

“All these things are new shoots of growth for the company,” Seyrafi said. “But I think that they want to deliver first and report it afterwards, rather than guiding beforehand.”

 

 

You May Like

Video Migrants Caught in No-Man's Land In French Port

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching 'Fortress Europe' More

Video Westgate Mall Attack Survivors Confront Painful Memories

On anniversary of terror attack, survivors discuss how they have coped with trauma they experienced that day More

New Hints That Dark Matter Exists

New evidence from International Space Station hints at existence of dark matter and dark energy More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Migrants Caught in No-Man's Land Called Calaisi
X
Lisa Bryant
September 19, 2014 5:04 PM
The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Militant Assault in Syria Displaces Thousands of Kurds

A major assault by Islamic State militants on Kurds in Syria has sent a wave of new refugees to the Turkish border, where they were stopped by Turkish border security. Turkey is already hosting about 700,000 Syrian refugees who fled the civil war between the government and the opposition. But the government in Ankara has a history of strained relations with Turkey's Kurdish minority. Zlatica Hoke reports Turkey is asking for international help.
Video

Video CERN Accelerator Back in Business

The long upgrade of the Large Hadron Collider is over. The scientific instrument responsible for the discovery of the Higgs boson -- the so-called "God particle" -- is being brought up to speed in time for this month's 60th anniversary of the European Organization for Nuclear Research, known by its French acronym CERN. Physicists hope the accelerator will help them uncover more secrets about the origins of the universe. VOA’s George Putic reports.
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video Russian Economy Reeling After New Western Sanctions

A new wave of Western sanctions is hitting Russia’s economy hard. State-owned energy firms continue to bleed profits and Russia’s national currency plunged to a new low this week after the U.S. and the European Union announced new sanctions to punish Russia's aggressive stance in eastern Ukraine. But as Mil Arcega reports, the sanctions could also prove costly for European and American companies.
Video

Video Belgian Researchers Discover Way to Block Cancer Metastasis

Cancer remains one of the deadliest diseases, despite many new methods to combat it. Modern medicine has treatments to prevent the growth of primary tumor cells. But most cancer deaths are caused by metastasis, the stage when primary tumor cells change and move to other parts of the body. A team of Belgian scientists says it has found a way to prevent that process. Zlatica Hoke has more.
Video

Video Mogadishu's Flood of Foreign Workers Leaves Somalis Out of Work

Unemployment and conflict has forced many young Somalians out of the country in search of a better life. But a newfound stability in the once-lawless nation has created hope — and jobs — which, some say, are too often being filled by foreigners. Abdulaziz Billow reports from Mogadishu.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video Iraqi Kurdistan Church Helps Christian Children Cope find shelter in churches in the Kurdish capital, Irbil

In the past six weeks, tens of thousands of Iraqi Christians have been forced to flee their homes by Islamic State militants and find shelter in churches in the Kurdish capital, Irbil. Despite U.S. airstrikes in the region, the prospect of people returning home is still very low and concerns are starting to grow over the impact this is having on the displaced youth. Sebastian Meyer reports from Irbil on how one church is coping.
Video

Video NASA Picks Boeing, SpaceX to Carry Astronauts Into Space

The U.S. space agency, NASA, has chosen Boeing and SpaceX companies to build the next generation of spacecraft that will carry U.S. astronauts to the International Space Station by the year 2017. The deal with private industry enables NASA to end its dependence on Russia to send space crews into low Earth orbit and back. Zlatica Hoke has more.
Video

Video Future of Ukrainian Former President's Estate Uncertain

More than six months after Ukraine's former President Viktor Yanukovych fled revolution to Russia, authorities have yet to gain control of his palatial estate. Protesters occupy the grounds and opened it to tourists but they are also refusing to turn it over to the state. VOA's Daniel Schearf reports from Mezhigirya, just north of Kyiv.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid

World Currencies

EUR
USD
0.7768
JPY
USD
108.84
GBP
USD
0.6124
CAD
USD
1.0999
INR
USD
61.042

Rates may not be current.