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Facebook Spooks Investors With Warning Of Sharp Rise In Costs

It turns out it costs income to build billion-user businesses. Who knew?

After profitable roughly $20 billion this year to acquire WhatsApp and Oculus, Facebook’s shareholders might have suspicion it was time to lay behind and suffer a fruits of their spending spree. But on a company’s third-quarter earnings call, Mark Zuckerberg and Sheryl Sandberg warned them that a costly part’s not over yet.

In a subsequent year, Facebook’s costs will arise between 50% and 70% as it goes on a employing binge, mostly to staff adult a new acquisitions. That, and a news that promotion income expansion is approaching to decelerate in a fourth quarter, sum to expostulate shares down around 10% in after-hours trading. (Coincidentally, 10% is about how many value Twitter shares mislaid Tuesday also, following that company’s news of another entertain of unsatisfactory user growth.)

This even yet Facebook had a initial $3 billion entertain ever. It scarcely reached that figure by promotion alone; including payments, a sum surfaced $3.2 billion. A full two-thirds of a ad income came from mobile ads.

 

Facebook is still raised fourth-quarter revenues of $3.6 billion to $3.8 billion, a 40% or larger boost over a year-earlier quarter. But since that entertain was such a abounding one, revenues won’t be adult by a same increment investors have expansion accustomed to. “We’re comping opposite only a unequivocally superb entertain final year,” pronounced David Wehner, Facebook’s new CFO.

As he mostly does, Zuckerberg started a call by articulate about his priorities over a three-year, five-year and 10-year span. Those embody removing Instagram, WhatsApp, Messenger and Oculus to a indicate where any has 1 billion users.

Of those, he suggested Oculus will need a many runway. “It needs to strech a really vast scale, 50 [million] to 100 million units, before it will be a suggestive thing as a computing platform,” Zuckerberg said. “I do consider it’s going to take a garland of years to get there.”

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Article source: http://www.forbes.com/sites/jeffbercovici/2014/10/28/facebook-spooks-investors-with-warning-of-sharp-rise-in-costs/

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