Facebook warns advertising revenue growth will slow

Facebook has warned growth in advertising revenues will slow “meaningfully” in the next few months as it tries to avoid alienating users. The social media giant’s chief financial officer David Wehner said there was a limit on the number of ads it could put on people’s timelines. Shares fell 7% in after-hours trading. The comments ...

Facebook has warned growth in advertising revenues will slow “meaningfully” in the next few months as it tries to avoid alienating users.

The social media giant’s chief financial officer David Wehner said there was a limit on the number of ads it could put on people’s timelines.

Shares fell 7% in after-hours trading.

The comments came as Facebook reported profits of $2.4bn (£1.9bn) between July and September, up 166% from the same period in 2015.

Most of Facebook’s revenues came from adverts, of which mobile accounted for 84%.

Facebook founder Mark Zuckerberg described the results as “another good quarter”.

Nearly 1.1 billion people now log onto Facebookon their mobiles every day, compared with 894 million a year ago.

But it has not been all plain sailing for the firm. In the past few months it has apologised for unfairly removing certain content, and admitted it overestimated how much video users have watched for the last two years.

Meanwhile Whatsapp, the messaging app Facebook bought for $19bn in early 2014, has been warned by European privacy watchdogs about sharing user data with its parent company.

‘Opportunity’

Facebook expected to add fewer adverts and for “ad revenue growth rates [to] come down meaningfully” in 2017, Mr Wehner said on Wednesday.

Analysts argued it would force the business to invest in other ways of making money.

“The traditional engine of their growth will slow down, but Mr Wehner didn’t give numbers on what it could make from new revenue streams,” said Martin Garner, an analyst at CCS Insight.

Josh Olson, an analyst at Edward Jones, said the group could still make more money from charging advertisers higher prices and through adding new customers.

“We have been down this road before with Facebook, they have invested something like this in mobile and we have seen it pay off. So we are looking at it as an opportunity,” he said.

Facebook is trialling a number of other potential money-making projects including a marketplace that allows users to sell items, and is experimenting with chat ‘bots’ in its messaging app, with a view to companies using them as a way to communicate with customers.

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Source: BBC

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