Facebook's first update riles investors

After a much-hyped IPO two months ago, Facebook is rapidly losing friends as its first results disappoint investors.

by Elizabeth Anderson
Last Updated: 27 Jul 2012
What a difference two months makes. Investors eagerly snapped up shares for $38 a piece when Facebook went public in May. Last night shares in the social networking giant fell 11% to $23.94 in frenzied after-hours trading after Facebook revealed a lacklustre quarter in its first earnings report as a public company.

Facebook’s financial report wasn’t all bad news. Revenue was up 32% to $1.18bn, beating analysts’ predictions. The number of monthly active users also rose to 955 million, a 29% increase on the same time a year ago. But even that has set alarm bells ringing, as it suggests growth is continuing its downward spiral.  In the final quarter of 2010, Facebook’s monthly users rose by 120%; since then growth has slowed by roughly a fifth each quarter.  

The number of users accessing Facebook on their mobiles also jumped 67% year-on-year to 543 million. The downside is it makes the Californian company less money, as the mobile site carries fewer adverts than the desktop site. In fact, Facebook only recently started putting adverts in the mobile newsfeed. Some 84% of Facebook’s revenues come from advertising, making $992m for the company in the second quarter.

Money also comes in from the sale of mostly virtual goods on Zynga. But on Wednesday the social games company knocked investors sideways by slashing its 2012 earnings forecasts. This helped Facebook’s shares slide 9% on Thursday, even before its own earnings were announced.  

Overall Facebook reported a loss of $157m for the quarter, but this was mainly because of heavy compensation charges associated with the IPO. Many analysts think Facebook is still worth a punt but warn its challenges are keeping users glued to the site; and continuing to profit from them by offering targeted ads, particularly on mobile devices. That won’t be an easy task.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Leadership lessons from Jürgen Klopp

The Liverpool manager exemplifies ‘the long win’, based not on results but on clarity of...

How to get a grip on stress

Once a zebra escapes the lion's jaws, it goes back to grazing peacefully. There's a...

A leadership thought: Treat your colleagues like customers

One minute briefing: Create a platform where others can see their success, says AVEVA CEO...

The ignominious death of Gordon Gekko

Profit at all costs is a defunct philosophy, and purpose a corporate superpower, argues this...

Gender bias is kept alive by those who think it is dead

Research: Greater representation of women does not automatically lead to equal treatment.

How to be a resilient leader

Louai Al Roumani was CFO of Syria's largest private retail bank when the conflict broke...