Facebook Q3 Earnings Skyrocket On Strong Mobile Ad Revenue, But Warns Of 2017 Slowdown

Mark Zuckerberg is a big picture person. Being that way should not conflict with how investors buy and sell stock, though it often does in an era where knee jerk reactions in the stock market are commonplace. Case in point, Facebook tore it up in the third quarter, bringing in $7.01 billion in revenue, up a massive 56 percent from the $4.5 billion it collected in the same quarter a year ago. And it more than doubled its profit for the quarter, coming out ahead $2.38 billion after paying the bills, up 166 percent from $896 million year-over-year. So why is Facebook's share price down more than 5 percent this morning?

Today's investors are fickle, that's why, especially in the technology sector. But a more specific answer is that they're concerned over comments Facebook CFO David Wehner made last quarter about ad revenue growth reaching maximum load, meaning the social network is reaching the point where running more ads would drive users away. At the time, he said Facebook expects to see "ad revenue growth rates come down meaningfully."


Maybe it will, but it didn't happen in the third quarter. Instead, Facebook saw its monthly active users rise to 1.79 billion, an increase of 16 percent year-over-year, while its mobile ad revenue accounted for 84 percent of all ad dollars for the third quarter, up from 78 percent in the third quarter of 2015. Facebook is making a killing beaming ads to users on smartphones and tablets, something investors were skeptical about just a few years ago. But just like then, Zuckerberg isn't fixated on the here and now.

"We had another good quarter," Zuckerberg said in a statement. "We're making progress putting video first across our apps and executing our 10 year technology roadmap."

In other words, he's looking at big picture stuff while investors are hyper focused on exactly how many more ads Facebook can cram into its service. But here's the thing, Facebook has been investing in all kinds of products and services such as messaging and video. Both have the potential to bring in more ad revenue. It's also dabbling with a game service similar to Steam, and its Instragram service just topped 500 million users.

Oh, and of Wehner's comments that has investors in sell mode? He again spoke of ad load earlier this month, but said it wouldn't play as big of a role in growing Facebook's revenue as it has in the past.

"We anticipate ad load on Facebook will continue to grow modestly over the next 12 months and then will be a less significant factor driving revenue growth after mid-2017. Since ad load has been one of the important factors in our recent strong period of revenue growth, we expect our ability to grow revenue will be impacted accordingly," Wehner said.

We'll have to wait and see how 2017 plays out, but regardless of the numbers, you can bet Zuckerberg will be focused on what's down the road rather than right around the corner.