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.
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.


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 Russia’s Syrian Escalation Tests Obama’s Crisis Response

Critics once again question whether president has been slow to act on Syrian conflict, thus creating opening for powers like Russia More

Ancient African DNA Shows Mass Migration Back Into Africa

First genetic analysis of ancient human remains in Africa suggests massive migration from north around time of Egyptian empire More

NASA: Pluto Has Blue Sky

New photos also reveal the presence of water ice More

This forum has been closed.
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.
Hungary Criticized for Handling of Refugeesi
Henry Ridgwell
October 08, 2015 8:02 PM
Amnesty International has accused Hungary of breaking multiple international and European human rights laws in its handling of the refugee crisis. As Henry Ridgwell reports, thousands of migrants and refugees continue to travel through the Balkans to Hungary every day.

Video Hungary Criticized for Handling of Refugees

Amnesty International has accused Hungary of breaking multiple international and European human rights laws in its handling of the refugee crisis. As Henry Ridgwell reports, thousands of migrants and refugees continue to travel through the Balkans to Hungary every day.

Video Iraqi-Kurdish Teachers Vow to Continue Protest

Sixteen people were injured when police used tear gas and rubber bullets to disperse teachers and other public employees who took to the streets in Iraq’s Kurdish north, demanding their salaries from the Kurdish Regional Government (KRG). VOA’s Dilshad Anwar, in Sulaimaniya, caught up with protesting teachers who say they have not been paid for three months. Parke Brewer narrates his report.

Video Syrian Village Community Faces Double Displacement in Lebanon

Driven by war from their village in southwestern Syria, a group of families found shelter in Lebanon, resettling en masse in a half-built university to form one of the biggest settlements of its kind in Lebanon. Three years later, however, they now face being kicked out and dispersed in a country where finding shelter as a refugee can be especially tough. John Owens has more for VOA from the city of Saida, also known as Sidon.

Video Bat Colony: Unusual Tourist Attraction in Texas

The action hero Batman might be everyone’s favorite but real bats hardly get that kind of adoration. Put more than a million of these creatures of the night together and it only evokes images of horror. Sarah Zaman visited the largest urban bat colony in North America to see just how well bat and human get along with each other.

Video Device Shows Promise of Stopping Motion Sickness

It’s a sickening feeling — the dizziness, nausea and vomiting that comes with motion sickness. But a device now being developed could stop motion sickness by suppressing certain signals in the brain. VOA’s Deborah Block reports.

Video Making a Mint

While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Activists Decry Lagos Slum Demolition

Acting on a court order, authorities in Nigeria demolished a slum last month in the commercial capital, Lagos. But human rights activists say the order was illegal, and the community was razed to make way for a government housing project. Chris Stein has more from Lagos.

Video TPP Agreed, But Faces Stiff Opposition

President Barack Obama promoted the Trans-Pacific Partnership on Tuesday, one day after 12 Pacific Rim nations reached the free trade deal in Atlanta. The controversial pact that would involve about 40 percent of global trade still needs approval by lawmakers in respective countries. Zlatica Hoke reports Obama is facing strong opposition to the deal, including from members of his own party.

Video Ukranian Artist Portrays Putin in an Unusual Way

As Russian President Vladimir Putin was addressing the United Nations in New York last month, he was also being featured in an art exhibition in Washington. It’s not a flattering exhibit. It’s done by a Ukrainian artist in a unique medium. And its creator says it’s not only a work of art - it’s a political statement. VOA’s Tetiana Kharchenko has more.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

VOA Blogs

World Currencies


Rates may not be current.