Facebook released its Third Quarter Earnings Report for 2016 and it has once again broken all records. In our article earlier this week, we had discussed the potential growth discussed by analysts and presented a few numbers that estimated Facebook’s revenue at about $6.9 billion. This quarter, Facebook has again broken all records and beaten all the third quarter estimates made by analysts.

Forbes reported, “Revenue in the third quarter, ending Sept. 30, rose 56% to $7.01 billion, from $4.5 billion in the same period a year earlier, topping the $6.9 billion expected on average among analysts polled by Yahoo Finance.” The gains were a record for Facebook and represented its sixth straight quarterly revenue beat, buoyed by mobile video ads sales, including those on Instagram. Mobile ad revenue represented about 84% of total ad sales in the latest quarter, flat from the prior quarter and up from 78% in the same period a year earlier. Facebook is the second biggest ad publisher after Google and is expected to generate global ad revenue worth $25.9 billion this year, eMarketer estimated.

The company posted a profit of $2.4 billion, or 82 cents a share, up 166% from a year-earlier profit of $896 million, or 31 cents a share.


User growth information of the latest quarter was strong and came from the Facebook post of Mark Zuckerberg himself. As far as the numbers go, Forbes were quick to do the math when the reported, “Total monthly active users grew 16% year-over-year to 1.79 billion, from the same period a year earlier. Year-over-year, daily active users in the latest quarter increased by 17% to 1.18 billion. Mobile-only monthly users hit 1 billion people for the first time.”

Facebook has been facing serious competitions from other players like Snapchat particularly in battling out screen time for teens’ mobile. Because of this, FB has been testing various features like its competitors, such as a more prominent featured camera and better photo and video filters. Facebook owned messaging apps WhatsApp and Messenger both have 1 billion monthly active users and Facebook reported earlier this year that Groups reached 1 billion user for the firs time.

Facebook talks future

The big news that came right after the Earnings Report were not the sky-high numbers, but various announcements that Facebook made that caused their stock to fall by 7%. Facebook CFO David Wehner said that ad revenue growth rates would slow meaningfully in 2017.

“Ad load — the ratio of ads to personal posts — has been an important factor in delivering strong growth in advertising revenue over the past two years but will taper off in the second half of 2017, Wehner told analysts on the company’s earnings conference call”, reported CNBC.

As far as ad revenue growth is concerned, it has averaged at 50% increase over the last 2 years and they are close to maxing out number of advertisements they can out in the newsfeed or timeline of users without damaging their experience. This is one of the main reasons why they won’t be able to increase the ad-load at the same pace next year.




In the interview with CNBC after the report was released, Wehner said the following, “The growth strategy is to invest in growing its user base and the amount of time those users spend on Facebook as those are two other factors fueling ad revenue growth at the social media giant. Hiring in the field of engineering and technology is one of Facebook’s biggest priority as they are looking to execute their 3-year, 5-year and 10-year roadmaps. We’re developing a number of new ad products as well as enhancing the ad products that we have out in the market today, so we’re taking what is a great mobile ad product on Facebook and Instagram and making it even better.”

The Drop in Stock Price

On Monday, we talked about the $1.6 billion per week Mark Zuckerberg made, but after the latest announcement of ad-revenue going significantly down from Wehner and Zuckerberg, the shares of Facebook fell 7%. It can be safe to say that when people are investing in social media giants, they are keeping a keen eye on user engagement, ad-revenue and new products, and with the news of ad-revenue going down, there was some havoc created in the market as Facebook prices fell.

Facebook CEO Mark Zuckerberg saw a fall of $3.7 billion from his net worth in the two hours after the market closed on Wednesday, as the company’s stock price fell despite strong third-quarter results, reported Forbes.



Mark Zuckerberg also said that “Facebook plans to make some key improvements to become a video-first platform, after experiments with creative tools in its in-app camera functions across its apps. One change will be a separate video experience, and another will be investing in infrastructure to deliver the best videos quickly. The idea for the video based platform is great, but that means the company will be increasing its expenses next year without generating more ad-revenue.” This might also be a key reason why FB’s stock price might have fallen in spite of breaking revenue estimates 6 times in a row.




With the third quarter report, Facebook has once again proven that they know better than most about how this business is done. As shown in the chart above, FB shares have increased 22% since the beginning of 2016 and they have clearly laid out their focus on future expansion and their immediate way of working for the 3-year, 5-year and 10-year plans.

Though Facebook is trying to cut down on ad-revenue and promote more video sharing to cut down competition from Snapchat and let its users spend more time on the app, it should be seen as a long-term investment rather than an expense. Instagram has already started making substantial money thanks in large part to the app’s glossy appeal and popularity among millennials and with subsidiaries like Oculus Rift, Messenger, Whatsapp, Facebook is far away from fear. Investors are backing Facebook to monetize its various ventures and are also looking forward for announcements on Workplace, Virtual Reality game-wear etc.

Though Facebook is planning to take it slow in 2017, we can’t expect it to be less profitable as there are various new things to look out for.