Facebook Profit Slides As R&D Costs Bite
Social networking giant posts positive results, but profits dip and revenue growth slows
Facebook’s development spend has helped produce another strong set of financial results from the social networking giant.
But the company’s latest set of results also revealed a profit slide and slowing growth of its revenue streams.
Facebook Results
Facebook has long been the tech darling of Wall Street, despite some initial doubts about its ability to monetise its service following its public listing back in 2013.
But for the first quarter ending March 31, Facebook posted a 20 percent slide in profit down to $512m (£341m) from $642m (£427m) in the previous year.
It seems that Facebook’s growing R&D spend on its drone program, WhatsApp, Instagram, and virtual reality headset maker Oculus Rift units have all impacted profits, with this spending likely to continue in 2015.
Facebook revealed that its costs and expenses for the first quarter were $2.61bn (£1.7bn), an increase of 83 percent from the first quarter of 2014, reflecting Facebook’s increasingly heavy spending.
Meanwhile revenues rose 42 percent to $3.5bn (£2.4bn) from $2.5bn (£1.7bn) in the same year-ago quarter. But Wall Street is a fickle master and it seems that Facebook’s sales rise was its slowest growth in quarterly revenue in two years. Consequently Reuters reported that Facebook shares fell 2 percent in after-market trading on Wednesday.
The bulk of Facebook’s revenues comes from advertising, which rose 46 percent to $3.32bn (£2.2bn). Again, mobile advertising was the biggest revenue generator here, (roughly 73 percent of total advertising revenue), up from approximately 59 percent of advertising revenue in the first quarter of 2014.
“This was a strong start to the year,” said Mark Zuckerberg, Facebook founder and CEO. “We continue to focus on serving our community and connecting the world.”
Facebook also revealed daily active users (DAUs) reached 936 million on average for March 2015, an increase of 17 percent year-over-year. Most of these were mobile users. Meanwhile monthly active users (MAUs) were 1.44 billion, an increase of 13 percent year-over-year. Again, most of these were using mobile devices.
Facebook Developments
Facebook is increasingly expanding from its social networking roots.
Besides the above mentioned purchases of a number of companies, Facebook also recently launched a new over the top voice calling application that aims to make phone calls more social and informative.
Facebook Hello connects with your Facebook account to display extra information on the people calling you, as well as providing a quicker way to connect and contact companies or venues with a presence on the site.
Meanwhile WhatsApp, Facebook’s other messaging-related app, has also revealed it will be offering voice calls.
And earlier this month during a Q&A session, Zuckerberg confirmed that Facebook would bring the Internet.org project to Europe. The Facebook led project aims to connect the unconnected parts of the world to the Internet.
