Market reaction to Facebook’s third-quarter results shows investors are concerned about how the company will kick-start its next phase of growth.
The Wall Street Journal
November 3, 2016
The third quarter has shown that Facebook has succeeded in extracting huge revenue growth at the expense of print media. Now the social network must dominate new frontiers.
Facebook reported third-quarter earnings and revenue Wednesday that beat Wall Street’s expectations. Revenue climbed 56% from the previous year to $7.01 billion as advertising revenue grew 59% to $6.82 billion. As impressive as those numbers were, they each represented a deceleration from the previous quarter. Shares fell after hours.
The slowdown shouldn’t have come as a surprise to investors. Facebook said during its second-quarter earnings report that advertising revenue would grow more slowly for the rest of the year. The company said Wednesday that it is reaching the limit of the number of ads it can cram into users’ feeds, which would cause ad revenue growth to come down “meaningfully” after mid- 2017.
Facebook has positioned video as its next growth vehicle. The goal would be to tap into TV ad dollars, helping the company reaccelerate its growth. But luring away that revenue could prove more difficult than conquering print. TV remains the best platform in the minds of many marketers for reaching a large number of people. Meanwhile, new Internet-based TV services and mobile-video offerings from the likes of Dish Network, AT&T, Verizon Communications and Hulu could keep ad dollars from leaving.
Facebook has proven its mobile dominance. As its market value has nearly doubled over the past two years, the question is how much of that opportunity is already priced in.
Article Link To The Wall Street Journal: