Facebook's advertising businesses are doing very nicely, thank you, as indicated in its third quarter 2014 earnings report Oct. 28 that beat analysts' projection in all the important areas.
Yet, as happens frequently on Wall Street, a successful company's stock took a header based on a cautious and not-exactly-optimistic outlook. The stock dropped a full 10 percent in after-hours trading Oct. 28 to $80.77; it dropped another 6 percent Oct. 29 to close at $75.86.
With a market cap of $197 billion, a drop of 16 percent in two days is -- at least on paper -- a loss of a bit more than $31 billion in value.
The giant social network projected that its costs and expenses will increase substantially -- between 50 percent and 70 percent next year -- because it is planning to invest in talent, is building a large addition to its home campus, and putting capital funds into new products, such as video, CFO David Wehner said on the company's conference call.
Facebook also sees Q4 revenue growing between 40 percent and 47 percent compared to the same period in 2013. That was a bit too conservative for Wall Street analysts, who were expecting year-over-year revenue growth of a solid 45 percent.
Facebook's overall revenue was reported at $3.2 billion with adjusted earnings per share of 42 cents. Income from advertising was reported at $2.96 billion, up a whopping 64 percent from a year ago. The company's mobile ad strategy is working well; two-thirds of that ad revenue came from its mobile products.
Another factor in the stock slide has to do with the company's $19 billion WhatsApp acquisition of last February. Numbers on the popular messaging site were released for the first time, exposing the app's currently unprofitable results.
WhatsApp lost $232.5 million, bringing in only $15.3 million in revenue during the first six months of 2014.
"Over a five year time frame, we have a number of services, which we think are well on their way to reaching a 1 billion people," CEO and co-founder Mark Zuckerberg said on a conference call to analysts. "Messenger, WhatsApp, Instagram and Search are a number of them. And once we get to that scale, then we think that they will start to become meaningful businesses."
Here are some key metrics. Daily active users increased year over year by 19 percent to 864 million. Total monthly active users climbed 14 percent year-over-year to 1.35 billion, while mobile monthly active users rose to 1.12 billion during the quarter, up 29 percent.
Thus, Facebook's engagement with its users remains strong, despite competition from a score of other social networks.