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Status update: Facebook posts loss in the third quarter

After signing up its billonth user this month, Facebook increases revenues by 32% but still reports a $59m (£37m) loss for Q3.

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Well, Zuckerberg must be doing something right. Revenues at the world’s largest social network have topped $1.26bn for the three months from July to September, up nearly a third on the previous quarter. And most of that sales growth has come from the tricky mobile business. Mobile ad revenues hit $150m over the period, up from an around $45m in the second quarter and next to nothing in the first. About 604 million of its 1.01 billion users now access Facebook on a mobile device. By George, he’s got it.

 

However, Big Blue still isn’t making any money. While Facebook has slashed its losses to a fraction of the $157m it haemorrhaged in Q2, the $59m loss must still smart. If Facebook is to recover its market value, which has halved since the IPO, it needs to show bullish profit growth sharpish.

Zuckerberg seems to think that he can still turn things around. ‘People who use our mobile products are more engaged, and we believe we can increase engagement even further as we continue to introduce new products and improve our platform,’ he says. Indeed, advertising revenues are up 36% compared to last year.

But the problem with driving up advertising income very quickly is that Facebook risks alienating its user base. As social media expert Caroline Baxter points out: ‘A seventh of the world's population is a lot of people to get on the wrong side of. All kinds of tweaks and changes have been made at Facebook over the past few months, and they've all been focused, unsurprisingly, on ramping up ad revenues. People have been talking about Facebook glitches and shorter fan reach but in reality, they're not glitches at all, just the social network making algorithm changes to turn a profit and appease shareholders.’

Of course, with a billion users, you can afford to annoy a few people. And Zuckerberg isn’t putting all his eggs in the advertising basket: Facebook Gifts could be a big winner for the social giant, Facebook Exchange is set to steal a wedge of market share from Skype and there are even rumours of a Facebook search engine. But it’s clear that Zuckerberg is trying to walk the fine line between alienating Facebook fans and its investors. And that’s a very thin blue line indeed...

This article was first published on managementtoday.co.uk

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