Mark Zuckerberg (Reuters/Stephen Lam)

Facebook: It's the best of times — so it will soon be the worst of times

The social media giant is growing so fast its growth rates aren't sustainable, so it's offering a grim forecast


Matthew Rozsa
November 3, 2016 11:00PM (UTC)

Don't blame Facebook for sending mixed messages — Mark Zuckerberg's social media giant is in an odd financial place right now: Despite posting a quarterly profit on Wednesday that wildly exceeded industry expectations, they're still bracing for impending losses, hoping their investors will do likewise, and suffering in the stock market as a result of this dour (but justifiable) outlook.

Facebook's third quarter revenue increased 56 percent to $7 billion, the company reported on Wednesday, nearly tripling its quarterly profit to $2.38 billion. Apart from companies that are growing due to acquisitions, Facebook's top-line growth rate is twice that of any American company with at least $20 billion in annual revenue.

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Much of this growth can be attributed to its dominance in mobile advertising, which is incidentally the same reason experts are predicting a decline next year.

"We expect revenue growth rates will decline as we lap strong quarters," said Chief Financial Officer David Wehner during a conference call with investors on Thursday. Because Facebook will stop showing users more ads in their news feeds, they will lose a vital ingredient in the formula that has fueled their revenue growth for the past two years. With that ingredient gone, Wehner told analysts, investors should brace themselves.

"As I mentioned last quarter, we continue to expect ad load will play a less significant role driving revenue growth after mid-2017," Wehner explained. "Over the past two years we have averaged about 50% compound revenue growth in advertising. Ad load has been one of the three primary factors fueling that growth. With a much smaller contribution from this important factor going forward, we expect to see ad revenue growth rates come down meaningfully."

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The stock market reacted with predictable dismay at this report. On Thursday shares of Facebook were valued at $121.42 during premarket trading, down 4.5 percent.


Matthew Rozsa

Matthew Rozsa is a breaking news writer for Salon. He holds an MA in History from Rutgers University-Newark and is ABD in his PhD program in History at Lehigh University. His work has appeared in Mic, Quartz and MSNBC.

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