Facebook shares slid 8.20 percent in after hours trading on Tuesday after the company’s 3rd quarter 2014 earnings report forecasted weaker revenue this next quarter along with increased spending plans in 2015 related to its newest acquisitions with Whatsup and Oculus VR.
Facebook acquired Oculus VR, a virtual reality wearable gaming technology, for $ 2 billion on March 25, 2014 although the company has yet to put a product on the market.
On February 19, 2014 Facebook purchased five year old company Whatsup for a staggering $19 billion in an effort to dominate messaging on smartphones.
In 2014 Whatsup has already lost $138 million and generated only $10 million in revenue.
During the conference call on Tuesday, Facebook CEO Mark Zuckerberg spoke about Facebook’s long term investments with Whatsup, Instagram, Messenger, and Search.
“Over the next five years, our goals are around taking our next generation of services — Instagram, Messenger, WhatsApp, and Search — and helping them connect billions of people and become important businesses in their own right” Zuckerberg said.
Facebook CFO David Wehner said that in 2015 spending costs (non-GAAP) could increase approximately 50 to 70 percent compared to 2014 as the company invests in new products.
Facebook Chief Operating Officer Sheryl Sandberg assured investors that Facebook’s investments are large scale, long term, and will take some time to payoff.
“I want to emphasize that the investments we’re making in ad tech are long-term. These are large and strategic investments. The payoffs will take time, but we think they provide a necessary foundation for the advertising industry to make the shift to mobile and for Facebook’s long-term growth” said Sandberg.
Facebook continues to dominate in mobile each month with 864 million daily active users on average for September 2014, up 136 million from last year, an increase of 19 percent year-over-year.
There are 703 million people using Facebook each day, 40 percent higher year over year, and 1.12 billion people are now using Facebook each month.
“This has been a good quarter with strong results,” said Mark Zuckerberg, Facebook founder and CEO.
For the quarter, advertising revenue was $2.96 billion and grew 64 percent year over year.
Mobile advertising revenue represented approximately 66 percent of advertising revenue for the third quarter, up from approximately 49 percent of advertising revenue in the third quarter of 2013.
Total revenue for the third quarter of 2014 totaled $3.20 billion, an increase of 59 percent, compared with $2.02 billion in the third quarter of 2013. Net income was $806 million, up 90 percent compared to $425 million for the third quarter of 2013.
Facebook CFO Dave Wehner spoke about growing 2014 expenses during the conference call.
“We expect our full-year 2014 total GAAP expenses, including cost of revenue stock compensation and the amortization of intangibles, will grow approximately 45 percent to 50 percent versus the full year 2013,” Wehner said.
“This increase from our prior range of 30 to 35 percent is primarily due to the impact of the WhatsApp acquisition on stock-based compensation charges in the fourth quarter” Wehner added.
Wehner said that he expects total revenue in the fourth quarter to grow in the range of 40 to 47 percent range versus the same quarter of last year, down from 59 percent in third quarter of 2014.
Wehner gave no guidance on 2015 revenue.
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