Business
4:16 am
Fri July 27, 2012

Facebook Earnings Reflect Slowing Ad Revenue

Originally published on Fri July 27, 2012 9:44 am

Transcript

RENEE MONTAGNE, HOST:

NPR's business news starts with earnings at Facebook.

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MONTAGNE: For the first time as a public company, Facebook has reported it's earnings. After its botched IPO, investors were hoping for a big, positive surprise to put the shine back on the social network. That didn't happen.

As NPR's Steve Henn reports, Facebook recorded a loss.

STEVE HENN, BYLINE: Despite narrowly beating many analysts expectations in terms of revenue, Facebook's earnings disappointed investors. In after hours trading last night, the stock fell more than 10 percent - and hit record lows.

Debra Aho Williamson follows Facebook for eMarketer.

DEBRA AHO WILLIAMSON: Before they went public, we had forecasted that Facebook would have $6 billion in total revenue this year. Obviously, things have changed.

HENN: Now Wall Street's investment banks believe Facebook's on track to earn a billion dollars less than Williamson and other expected just a few months ago. So what happened?

WILLIAMSON: What we saw last year was a lot of hyper growth.

HENN: And then it stopped.

Last year, the amount of ad revenue Facebook was bringing in the door was almost doubling every 12 months. Today, ad revenue is still growing at the company - but the rate of growth is much slower and it's decelerating.

When Facebook went public, it was valued at more than $100 billion. But that sky-high stock price was built almost entirely on expectations of what the company would do in the future. And today, expectations have changed.

Steve Henn, NPR News. Transcript provided by NPR, Copyright National Public Radio.