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Facebook Announces Growth In Profits

Zuckerberg Uses Record Revenue To Invest In The Future

Facebook announced its earnings for the second quarter of this year, recording an astonishing  138% rise in profits. Their revenue grew to $2.91 billion, with expenses of $1.52 billion – a net income of $791 million.

The source of this growth is particularly of interest, considering the ways in various social media platforms have been moving towards diversifying their revenue streams in recent months – Facebook included.

Revenue from advertising was up by 67%, accounting for $2.68 billion of Facebook’s revenue, and of that money 62% was from mobile advertising. Considering that in 2012 mobile advertising revenue was virtually nil, this is a prime example of a social media company finding methods of monetising an aspect of user interaction which had previously been a loss-maker.

Much of the credit for this growth in mobile advertising can be attributed to Facebook’s implementation of auto-playing videos in users’ feeds, and the correspondingly higher charges for advertisers to have their videos featured. This is on top of the simple fact that Facebook’s user base has grown by 14% since last year to 1.32 billion active monthly users, and many of these new users access the site primarily on mobile.

In addition, following Facebook’s purchase of Instagram in 2012 the photo-sharing site now features image ads which will help contribute to the parent company’s profits.

It is the fact that this growth comes alongside Facebook’s acquisition of WhatsApp and Oculus Rift, two companies with no short-term profitable prospects, which will raise some eyebrows. Rather than throw the company’s weight behind its most immediately profitable aspects – on-site advertising and data mining operations – Zuckerberg is instead using these to fund speculative ventures which he hopes will secure the company’s long-term relevance.

Speaking with investors on Wednesday, Zuckerberg said that ‘We think it could be years of work before those are huge businesses for us…We could take the cheap and easy approach and put ads in and do payments and make money in the short term, but we’re not going to do that.’

The mention of ‘payments’ refers to Facebook’s announcement earlier this week that it will be trialling the implementation of a ‘Buy’ button on some businesses pages, allowing users to purchase items they see without ever leaving the site. Moves like this, alongside their more headline-grabbing takeovers, do show that the social media giant is maintaining a consideration for maintaining this kind of short- and medium-term growth.

The news does mean little change for users. The level of advertising on the site is likely to stay relatively level, with perhaps minor tweaking of aspects like layout and frequency. Such tinkering is likely to be focused on mobile users as Facebook seeks to maximise this new source of income, and since their introduction of adverts to Instagram garnered a vocal backlash but an overall growth in number of users they will feel secure in risking a little public outrage in exchange for striking the ideal balance between profitability and user satisfaction.

Douglas is an English Literature graduate who has written about everything from music to food to theatre, now a content creator for Social Media Frontiers. No topic too large or too small. Follow him @DouglasAtSMF.

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Facebook Announces Growth In Profits Reviewed by Anonymous on Friday, July 25, 2014 Rating: 5
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