Costs rise faster than sales
At first glance, it’s a dream result. The online network Facebook saw significant growth in revenue, profits, and user numbers in 2014. Recently, however, costs have also risen sharply. And for the first time since its initial public offering, the number of heavy users has stagnated.
The annual profit of 2.94 billion dollars is based on a 58% increase in turnover. And the figures for the final quarter are also impressive: A 49 percent increase in turnover, a 13 percent increase in user numbers and a 53 percent increase in advertising revenue.
Nevertheless, the share price fell by almost three percent after the presentation of the balance sheet. Since the end of October, the drop has amounted to almost eight percent. According to analysts, expectations are huge and expenditure has recently increased more than expected.
High costs
In fact, costs are now rising faster than turnover. They increased by 87 percent in the past quarter. Expenditure on research and development alone reached more than one billion dollars.
As a result of hiring and acquisitions, Facebook employed around 9,200 people at the end of 2014, 45 percent more than in the previous year. At the same time, revenue only increased by 49 percent in the fourth quarter. This is the weakest growth since the beginning of 2013.
However, there are fears on the stock market that cost growth could soon come at the expense of profits. Investors at Amazon have also been skeptical for some time as to whether the online retailer is investing too much money too quickly in new business areas.
Facebook must find ways to make acquired companies such as 3D glasses specialist Oculus VR or Whatsapp profitable. Facebook CEO Mark Zuckerberg compared the expensively purchased chat application with Facebook in 2007, when the online network was still largely ad-free.
Nevertheless, Zuckerberg wants to continue investing in order to hold his own against the competition. Investments this year are likely to total between 2.7 and 3.2 billion dollars, the world's largest Facebook announced on Wednesday evening. In 2014, it was only 1.83 billion dollars.
Stagnation among frequent users
Analysts see the number of frequent users as another fly in the ointment. These daily active users are particularly valuable to Facebook due to their high level of engagement. However, their number remained constant over the entire final quarter. This is the first time since the IPO two years ago that no increase has been recorded here.
However, the potential for advertising revenue, particularly from the mobile sector, remains high. In the last quarter, ads on mobile devices such as smartphones already accounted for 69 percent of total advertising revenue. Analysts expect that revenue from video advertising could give Facebook its next business boost. They have been bookable by customers since last year. CFO Dave Wehner said that there is great interest from marketers Facebook wants to invest heavily in research and development in order to maintain its market position. The group must find solutions to make subsidiaries such as 3D glasses specialist Oculus VR or Whatsapp profitable. (SDA)
Facebook earned 2.94 billion dollars in 2014 as a whole. Revenue increased by 58 percent to 12.47 billion dollars compared to the previous year.
