Facebook’s Gift to Investors: More Holiday Ads

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Ahead of the release of the social network’s third-quarter earnings, investors and analysts alike were waiting to see whether Facebook (NASDAQ:FB) could repeat its second-quarter growth. After the company’s 2012 initial public offering, investors began to doubt whether the platform would remain as popular with users and advertisers as more and more people began to access the Internet more often on mobile devices than on desktop computers. However, in the second-quarter, its earnings gave cynics reason to believe that the mobile platform could be successfully monetized. Thanks to massive growth in mobile advertising, with revenue increasing 76 percent to $656 million from the previous quarter, sales rose 53 percent year-over-year. In total, mobile advertising accounted for 41 percent of total revenue, up from 30 percent in the first-quarter.

Yet, a comment made by Facebook Chief Financial Officer David Ebersman during the post-earnings release conference call gave investors a reason to be concerned; he said the company would not “significantly increase” the number of ads inserted into users’ News Feeds, which are currently the biggest driver of revenue. Those few words were enough to stanch the advancement of the social network’s stock.

After earnings were released on October 30, investors had bid shares up 15 percent in after-hours trading on the strength of the quarter’s numbers. Yet, after Ebersman mentioned “ad load,” the stock began plummeting, falling first to its closing price of $49.01 and then dropping even lower. In the end, Facebook lost $18 billion in market value in seconds.

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