Facebook has posted revenues of $7bn for its third quarter, a rise of 56 per cent, driven by a huge increase in advertising revenue. However, the firm admitted that the site is reaching a limit to the number of adverts that can be displayed, which will affect growth.
Total advertising revenue for the quarter was $6.8bn, up 59 per cent year on year. This helped drive revenue, and profit for the quarter was $3.1bn, despite costs and expenses increasing 28 per cent.
This was a 114 per cent increase on the same period in 2015, and underlines the success Facebook has had in enticing advertisers to the platform.
Notably, 84 per cent of all advertising revenue came from spending on mobile advertising, up from 78 per cent in the year-ago quarter.
Facebook founder and CEO Mark Zuckerberg didn’t get ahead of himself with the results, though, saying merely that the firm had “another good quarter” and touting an ongoing focus on video tools.
"We're making progress putting video first across our apps and executing our 10-year technology roadmap,” he said.
Facebook also gave more insights into user engagement on the website, revealing that it now has an average daily active user count of 1.18 billion, up 17 per cent year on year. Mobile daily active users increased to 1.09 billion.
However, despite the almost uniformly positive results, Facebook’s stock fell after the earnings call to discuss the results when chief financial officer David Wehner warned that the firm expects revenues to fall as it reaches a limit on the number of ads it can show.
“We continue to expect that ad load will play a less significant factor driving revenue growth after mid-2017. Over the past few years, we have averaged about 50 per cent revenue growth in advertising,” he said.
“Ad load has been one of the three primary factors fuelling that growth. With a much smaller contribution from this important factor going forward, we expect to see ad revenue growth rates come down meaningfully.”
However, Facebook could always increase the rates it charges, or bring on new advertisers to increase revenues, so the ad placement problem may not affect longer-term growth.
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