Facebook Shares Drop, Revenue Remains High
Facebook shares have decreased by more than 3% on 29th July; the huge revenue didn’t cancel out the effect of high expenditures.
Investing in some of the largest companies counts as gambling. Here, however, you take a chance on some well-known organizations instead of looking for some online gambling business opportunities. There is no problem with this, but how about some current information on the companies you have your eyes on? This time, Facebook shares are under the magnifying glass, so you can make an educated decision on whether to invest.
Facebook is a humongous company. Just to put things in perspective: according to Statista, as of 2014, Facebook provides jobs to 9,199 people. Fun fact it started out in 2004 with only 7 employees. Not a bad growth rate, is it? Now, however, Facebook shares are down by a significant percentage. First, let’s look at the numbers. As Forbes reports, the company’s second quarter net income this year was USD 719 million (25 cents per share.) Last year, at the same period, this figure was much higher: USD 791 million (30 cents a share.) Revenue, however, literally skyrocketed compared to last year.
Revenues are high: mainly thanks to mobile advertisement
Just like gambling software providers, the social media giant also recognizes the huge potential in the mobile business. Because of this, the company put a huge emphasis on managing its mobile ad department, which in turn brought in a total of USD 4.04 billion in revenue for the last quarter. As Forbes reports, that is an increase in revenue of 39% compared to last year’s second quarter earnings. According to BBC, the mobile ad business makes up for more than 75% of the company’s total earnings. With the usage of videos, too, income from mobile ads will continue to grow.
Sheryl Sandberg, Facebook’s Chief Operating Officer said to Forbes with regards to the mobile advertising business: “We have the best mobile advertising product in the market, and video is making it even better.” She also added during her conference call with Forbes, that “Facebook’s ad products for small and medium-sized businesses aren’t yet simple enough, but that they are the simplest products available.” Out of 40 million small and medium-sized businesses, only 2 million use the ad platform Facebook provides. Just imagine what would happen if only a small portion of those untapped sources were to use the ad service Facebook provides.
Despite the huge growth, Facebook shares fell by 3%
As BBC reports, Facebook shares dropped by almost 4% in after hours trading. It turns out, the company’s predicted percentage of expenditures for this quarter was an increase of about 65%. With the second quarter report coming out, however, it quickly became apparent that spending rose by a whopping 82%. According to Forbes, the reason for such high numbers lies in the fact that Facebook hired new employees to expand their research and development section (just like many gambling software developers do.) As Forbes states, Facebook also invested heaps of money in “data centers, artificial intelligence, virtual reality and a company project to expand global Internet access.”
Even though expenditures remain high, there is no reason for any panic: Facebook’s growth is imminent. According to Forbes, the number of people using Facebook per day was 968 million in June (a 13% increase compared to last year.) Other applications of Facebook, like Messenger are also booming; the number of users per month for Messenger just reached the 700 million mark. Whatsapp has 800 million users each month and Instagram boasts of 300 million users per month. What is a little 3% share-drop for such a giant?