Saudi- Facebook expects 'more difficult' fourth quarter

(MENAFN- Arab News) SAN FRANCISCO: Facebook Chief Financial Officer David Wehner said the social network faces a 'more difficult comparison' in the current quarter compared with a year earlier triggering a selloff in the company's shares.

Wehner said on a conference call after Facebook reported third-quarter earnings that revenue for the current period will be 40 percent to 47 percent above that of a year earlier indicating sales of $3.6 billion to $3.8 billion. That fell slightly short of analysts' average projection of $3.73 billion for the quarter according to data compiled by Bloomberg and is down from 59 percent growth in the prior period.

Wehner said the Menlo Park California-based company faces the tough comparison because Facebook rolled out ads in members' News Feeds on a large scale at the end of last year which helped spur results at the time. Wehner said expenses are also set to increase 50 percent to 70 percent in 2015.

'We're comparing against a really outstanding quarter last year' he said.

Facebook posted its third-quarter results after the close of markets Tuesday.

Shares of Facebook have gained 48 percent this year pushing the company's market capitalization past $209 billion.

But the combination of slowing revenue growth and rising expenses 'will likely force investors to adjust their near-term profit outlook' said Paul Sweeney an analyst at Bloomberg Intelligence.

Wehner's forecast followed Facebook reporting sales for the third quarter of $3.2 billion up 59 percent from a year earlier and exceeding the $3.1 billion average estimate from analysts.

Mobile promotions accounted for 66 percent of ad sales up from 62 percent in the prior period and 59 percent in the first quarter the company said in a statement.

Profit excluding some items was $1.15 billion or 43 cents a share compared with the 40 cents that analysts projected.

Facebook has expanded mobile promotions from nothing at the time of the company's 2012 initial public offering to a majority of revenue.

To keep expanding sales Facebook CEO Mark Zuckerberg has been opening up opportunities for revenue beyond its main application debuting ad networks for video and mobile and making acquisitions.

Brian Wieser an analyst at Pivotal Research Group said Wall Street has come to anticipate that Facebook will blow past estimates each quarter.

'This was an above-consensus outcome but only slightly and to the extent that expectations are generally above-consensus figures there wasn't a major surprise' he said.

Net income rose to $806 million almost doubling from $425 million a year ago.

The company said its user base expanded to 1.35 billion members in the third quarter up about 2.3 percent from 1.32 billion in the prior quarter and up 14 percent from a year earlier.

Facebook continues to exhibit fast growth compared with other technology companies that make money from digital advertising.

Google earlier this month posted a 20 percent sales increase for the third quarter missing analysts' estimates with the number of clicks on ads decelerating from the prior period.

Facebook expanded ad initiatives this year by opening up its network of advertisers to software developers who can now run Facebook ads on their apps. The company also acquired LiveRail which will help it serve video ad across the Web.

Acquisitions also open new potential avenues to revenue.

The company this month closed a $22 billion acquisition of WhatsApp the messaging service with more than half a billion members worldwide.

Facebook said it hasn't determined how it plans to make money off WhatsApp or its own messaging app Messenger.

Facebook filed a financial statement Tuesday saying WhatsApp generated $10.2 million in revenue in 2013 and an operating loss of $138.5 million.

The costs of revving up ad growth are mounting. Facebook said expenses totaled $1.8 billion for the third quarter up about 41 percent from a year ago.