Facebook growth slows: Has the social network peaked?
While Facebook reported record fourth-quarter revenue of more than $21bn, analysts worry its sales growth is slowing.
Facebook Inc.’s growth is slowing, adding pressure to a company facing more-restrictive privacy regulations and continued scrutiny from global lawmakers and antitrust officials.
The world’s biggest social-media company reported record fourth-quarter revenue of $21.1 billion, boosted by ads on Instagram and in video. The 25% increase from the period a year earlier was the slowest-ever quarterly sales growth for the company, though it topped analysts’ average estimate of $20.9 billion. Facebook said it had 2.89 billion users of its products around the world, but the growth on the main social network — the primary source of advertising sales — has started to slow. Shares fell in extended trading on the news.
Facebook has warned for several quarters that growing at the same rate will be more difficult in the future. The company’s trajectory is limited by the number of world internet users, most of whom already have an account on Facebook or its WhatsApp, Instagram or Messenger properties. That means finding future revenue streams will be increasingly difficult, requiring experimentation with avenues that might not pay off, such as in artificial intelligence, virtual reality and shopping.
What Facebook “has to grapple with is a rising cost framework while each incremental dollar of revenue growth gets tougher,” said James Cakmak, a partner at Clockwise Capital.
Expenses rose 34% to $12.2 billion the period ended Dec. 31, the Menlo Park, California-based company said Wednesday in a statement.
The uncertainty comes as Facebook has fewer public cheerleaders. The company has been vilified by U.S. presidential candidates, while facing new global privacy laws and two federal antitrust probes. Chief Executive Officer Mark Zuckerberg has testified multiple times about his company’s stumbles in front of Congress.
Still, Facebook and Google dominated digital ad spending with an estimated 61% of the market in 2019, a slight increase from a year earlier, even as Amazon.com Inc. gains sales, researcher EMarketer said in November.
Facebook’s main social network had 2.5 billion monthly active users as of Dec. 31, slightly topping analysts’ estimate of 2.49 billion.
Shares declined about 7% in extended trading after closing Wednesday at a record high of $223.23 in New York. The company reported profit of $2.56 per share, beating the $2.53 per share analyst estimate.