Facebook reported a plunge in fourth-quarter profit on higher spending, even while it made long-awaited progress luring advertisers eager to reach mobile- device users, according to Bloomberg.
Net income fell 79 percent to $64 million last quarter as operating expenses jumped 82 percent, Facebook said in a statement. That outpaced a 40 percent revenue gain to $1.59 billion and raised concerns that margins will come under pressure. The stock fell 3.5 percent in late trading after an initial decline of as much as 11 percent as investors weighed near-term lower profit against the prospect of future growth.
Chief Executive Officer Mark Zuckerberg plans to increase expenses, excluding certain costs, 50 percent this year to hire staff and roll out new tools for advertisers.
Facebook’s increased investment is designed to help the company grapple with rising competition from larger rivals in the U.S. market for mobile advertising, predicted by EMarketer Inc. to surge 82 percent this year. Google is projected to grab 57 percent of that market, and Facebook will remain a distant No. 2 with 12 percent, EMarketer estimates.
Mobile contributed 23 percent of total advertising revenue, or about $306 million, according to Facebook. That compares with 14 percent in the third quarter. Analysts at JPMorgan Chase & Co. predicted mobile would contribute $384.2 million, or 27 percent of ad revenue, in the latest quarter.
Facebook’s engineers are making improvements to mobile applications, including those for Google’s Android software, Zuckerberg said on a conference call. Better mobile services can boost user engagement, he said.
Facebook’s fourth-quarter operating margin declined to 33 percent from 48 percent a year earlier, while costs rose to $1.06 billion from $583 million.
Facebook reached 1.06 billion users during the fourth quarter, up from 1.01 billion in the third quarter. The number of mobile users was 680 million, up from 604 million in the third quarter.
