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Facebook reports slow growth and higher costs

April 23, 2015 By: Dr Search Principal Consultant at the Search Clinic Category: Facebook, internet, Pay Per Click, Search Clinic, Social Media, Social Networking, Technology Companies

Facebook shares fell after the company reported slower revenue growth, while research and development costs ate into profits.

Facebook reports slow growth and higher costsThe social networking company said profit in the first quarter of 2015 was £341 million, down 20% on a year earlier.

While revenue rose 42% to £2.33 billion- that was slightly below analysts’ forecasts. A bright spot was the rise in monthly active users, up 13% from a year earlier to 1.44 billion.

Notably, for those investors concerned about the firm’s efforts to appeal to younger users who access Facebook on their smartphones, monthly mobile users increased by 24% to 1.25 billion, a majority of the site’s users.

Facebook has been particularly adept at channelling that growing mobile user base into advertising dollars.

The company said that during the quarter, revenue from mobile ad sales made up nearly three quarters of total ad sales.

“This was a strong start to the year,” said founder and chief executive Mark Zuckerberg in a statement.

Investors have been worried about slowing revenue growth, as well as increasing costs at the company. Facebook has been spending more on research and development as it moves beyond its original social networking operation.

Spending on research and development jumped to £377 million from £120 million a year earlier.

The company has warned that those costs are set to increase, as it looks to expand some of its acquisitions including photo-sharing site Instagram, messaging service WhatsApp, and virtual reality firm Oculus Rift.

The trends are all going in the right direction. The cost rise is one thing that can derail this story. The question is, can they keep costs under control and what will be the new revenue streams around video, Instagram and virtual reality around Oculus?

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