Masterclassing

Facebook Posts $2.3bn Profits for Q3, Talks Ad Load Issues and Messaging Opportunities

Alex Spencer

zuckerberg 10 yearsFacebook has posted its financial results for Q3 2016, with revenues of $7bn, up 56 per cent year-on-year, and profits of $2.3bn, up 166 per cent.

Advertising accounted for 97 per cent of revenues at $6.8bn, with mobile making up 84 per cent of that figure, compared to 78 per cent a year ago.

That's off the back of a rise in users on mobile devices, with mobile DAUs up 22 per cent to 1.1bn and MAUs up 20 per cent to 1.7bn in September 2016. That means that two-thirds of Facebook's active users log into the social network on a daily basis.

On the company's earnings call, however, CFO David Wehner cautioned that this kind of growth may not continue into 2017.

"Over the past few years, we have averaged about 50 per cent revenue growth in advertising," said Wehner. "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."

With the News Feed – the core of Facebook's ad offering – beginning to get saturated, the company will have to turn to other sources in order to fuel further growth. This means making more money from its ancillary apps, like Instagram, Messenger, and WhatsApp.

"I think about our progress here in three phases," said CEO Mark Zuckerberg on the call. "The first phase is building a great consumer experience and getting it to scale. The second phase is about enabling people to organically interact with businesses. And then the third phase is to give businesses tools to reach more people, and that's where we build our business."

Zuckerberg identified Instagram as being in the third phase, while Messenger has recently moved into the second,. As for WhatsApp, he promised "we're going to really start working on the second phase in the next year".