Facebook Warns Of Ad Saturation, As Profit, Revenue Surges

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Quarter of the world’s population now uses Facebook, with nearly two billion people signed up to the social network

Facebook’s latest financials have revealed impressive growth at the social network, but it tempered this with a warning of a looming slowdown in the growth of ad revenues, its principle money maker.

The social network however remains hugely popular, with nearly two billion people accounted as users. Monthly active users (MAUs) grew 17 percent in the quarter to reach 1.94 billion people.

But Facebook does have its weaknesses, after it and Google admitted this week they had been tricked out of more than $100 million (£77m) in a sophisticated phishing scam.

data centreStellar Growth

Despite that setback, Facebook continues to bring in the money in spades. For the first quarter ending 31 March, it posted a staggering 76 percent rise in profits to $3.1billion (£2.4bn) from $1.7billion (£1.3bn) in the same year-ago quarter.

There was equally good news on the sales front, as revenues surged 49 percent to $8billion (£6.2bn) from $5.4billion (£4.2bn) a year ago.

This was well ahead of the $7.8bn (£6.1bn) expected on average among analysts, and it is the eighth quarter in a row that Facebook has beaten Wall Street expectations.

Advertising made up the bulk of this, after ad revenues rose 51 percent to $7.8billion (£6.1bn) in the quarter. Mobile ad revenues represented about 85 percent of total ad sales in the latest quarter, up from 82 percent in the same period a year earlier.

This places Facebook as the second largest advertising seller after Google.

“We had a good start to 2017,” founder and CEO Mark Zuckerberg modestly proclaimed. “We’re continuing to build tools to support a strong global community.”

With stunning growth that like, it is hard to see where Facebook can go wrong.

But chief financial officer David Wehner did warn that its expenses are growing, and that when the third quarter rolls around, expenses will increase “meaningfully”.

He also warned that the growth of the amount of adverts it can show users is reaching saturation point, and will impact ad revenue growth moving forward.

As a result, Facebook shares fell as much as three percent in after-hours trading.

Active Users

However there is little doubt that the Facebook platform continues to thrive, with daily active users increasing by 18 percent to 1.28 billion in the quarter, compared to a year ago.

And there is growing user activity on Facebook’s suite of apps, as its WhatsApp and Messenger apps now both have more than 1.2 billion monthly active users.

Instagram meanwhile has more than 700 million monthly active users.

Ongoing Pressures

Despite all the above, it is not exactly plain sailing for Facebook’s management team at the moment.

The social network announced this week that it is hiring an extra 3,000 to moderate online content.

It comes after the Facebook platform was used to live stream a murder in the United States, and another case in the Far East.

The network is also under ongoing pressure over its handling of child abuse, self harm and hate speech on the platform.

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