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What you need to know: This weblog captures key data points about the global telecoms industry. I use it as an electronic notebook to support my work for Pringle Media.

Thursday, November 3, 2016

Facebook Signals Tougher Times Ahead

Facebook reported a 56% year-on-year increase in revenues for the third quarter to 7 billion US dollars. But the social network warned of slower growth ahead, primarily because it is running short of inventory in which to place adverts (as users will only tolerate so much advertising). "Revenue growth rates will decline in Q4 as we lap a strong fourth quarter in 2015," said Dave Wehner, CFO of Facebook. "Ad load will play a less significant role driving revenue growth after mid-2017. Over the past two years we have averaged about 50% compound revenue growth in advertising. Ad load has been one of the three primary factors fueling  that growth. With a much smaller contribution from this important factor going forward, we expect to see ad revenue growth rates come down meaningfully."

Wehner added that costs will rise: "We anticipate 2017 will be an aggressive investment year. Adding top engineering talent remains one of our key investment priorities as we continue to execute on our 3-, 5- and 10-year roadmap. We will continue to invest in our ability to recruit top technology talent both in the Bay Area and beyond. In addition, we expect to grow capital expenditures substantially as we continue to fund the ongoing data center expansion efforts that we have underway."

Mark Zuckerberg, CEO of Facebook, also flagged an increase in spending on virtual reality content: "And since we believe the next phase of VR is great software experiences, we're investing another $250 million in virtual reality content -- on top of the money that we've already invested." Source: Facebook earnings transcript

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