Facebook reported a strong increase in revenues and profitability in the third quarter, driven by growth in its ad revenues as well as more users of the social network. Revenues were up 56 percent year-on-year to USD 7.011 billion, of which 84 percent were ad revenues, up from 78 percent a year ago.
Operating profit more than doubled, to USD 3.122 billion from USD 1.459 billion, and the margin rose to 45 percent from 32 percent a year earlier. The company's net profit jumped to USD 2.379 billion or 82 cents a share from USD 896 million or 31 cents a share, helped by a drop in the tax rate to 25 percent.
Facebook reported 1.79 billion monthly active users for the period, up 16 percent year-on-year, and 1.66 billion were mobile users, a 20 percent annual increase. On a daily basis, 1.18 billion people used its services, or 17 percent more than a year ago. The average revenue per user increased to USD 4.01 from USD 2.97 in Q3 2015.
Facebook expects the strong growth to slow from the middle of next year, as it reaches a saturation point in how many ads it can show users, the Wall Street Journal reports. The company will stop showing users more ads in their news feed, a tactic it has been using to boost revenue growth for the past two years, the company said. As a result, advertising growth will "come down meaningfully," CFO Dave Wehner said during a call with analysts on the Q3 results.
Facebook now expects a “much smaller contribution from this important factor going forward,” he said. He added that Facebook expects to power growth by adding more users and boosting the amount of time they spend on the social network. Video is key to that strategy. Facebook also expects an increase in costs next year, as it plans to spend more on data centers and hiring engineers.
