Sarah Frier San Francisco
MARK Zuckerberg is spending faster to chase opportunities in messaging and mobile advertising as sales growth slows at Facebook’s main social-networking service.
The company said on Wednesday that spending will jump 55 percent to 70 percent in 2015, narrower than the 50 percent to 75 percent range that it projected in October. Zuckerberg has said Facebook was investing in messaging, advertising across the web, hiring and new technologies such as artificial intelligence.
Total expenses in the fourth quarter soared 87 percent to $2.72 billion (R31.4bn). That hit profit, with the Menlo Park, California-based company reporting an operating margin of 29 percent, compared with 44 percent a year earlier.
Sales totalled $3.85bn, up 49 percent and slower than the 63 percent growth in the fourth quarter of 2013.
The spending resembles that of other web companies including Google and Amazon.com, which are also investing in ventures from drones to cloud computing that are outside of their core businesses. Facebook has paid billions to acquire companies including cellphone messaging service WhatsApp and virtual reality company Oculus VR to attract users as internet trends change rapidly, yet revenue from the two platforms remains negligible.
“Facebook is going after some very big opportunities and if they want to compete with the likes of Google and Amazon and Apple they are going to have to spend for growth,” said Neil Doshi, an analyst at CRT Capital Group, adding that questions about the spending were “warranted.”
Zuckerberg said in a conference call on Wednesday that building new products and profiting off them would take time. A transition may be as complicated as Facebook’s switch from making money off desktop ads to cellphone adverts, he said, with the company creating a cellphone advert business from nearly scratch after going public in 2012.
“Doing this is going to take a lot of effort over the coming years, and Facebook is going to have to evolve,” the chief executive said.
Net income rose to $701 million in the fourth quarter, up 34 percent from $523m a year ago. Profit excluding some items was 54c a share, compared with 48c projected on average by analysts.
Facebook’s users totalled 1.39 billion at the end of the quarter, up 3 percent from 1.35 billion in the prior period. The company is making more money from each member, with average revenue per user rising $2.81 in the fourth quarter, up 31 percent from a year earlier.
Expenses were driven in part by research and development, which made up 29 percent of revenue, while sales and marketing expenses accounted for 16 percent.
Facebook chief financial officer David Wehner defended the spending, saying the company was coming “from a position of strength”.
– Bloomberg