Newspaper article International New York Times

Facebook's Bets on the Future Worry Investors ; as Profit and Revenue Grow, Zuckerberg Vows to Spend Billions More

Newspaper article International New York Times

Facebook's Bets on the Future Worry Investors ; as Profit and Revenue Grow, Zuckerberg Vows to Spend Billions More

Article excerpt

Mark Zuckerberg seems determined to invest heavily over the next decade on ventures that might never generate substantial profits.

Facebook shareholders got a sobering reminder this week: It's Mark Zuckerberg's company, and he is determined to spend billions of dollars over the next decade on ventures that might never generate substantial profits.

Facebook reported strong growth in revenue and profit for the third quarter, continuing its recent string of impressive performances.

But in a conference call on Tuesday to discuss the results with investors, Mr. Zuckerberg, a founder of Facebook and its chief executive, focused more on his vision for the company over the next three, five and 10 years.

He talked about his recent $21.8 billion acquisition of WhatsApp and how he wanted to take the mobile messaging app quickly to a billion users from 600 million. ("For us, products really don't get that interesting to turn into businesses until they have about one billion people using them," he said.)

He mused about the potential of Oculus VR, the virtual reality company that Facebook bought for $2 billion, which will need "a bunch of years" to sell enough of its still-unfinished headsets to contribute to Facebook's bottom line.

And he waxed eloquent about the prospect of bringing people in poor countries like Zambia onto the Internet, an almost charitable endeavor that won't reap financial returns for a long time.

Not once did he utter the word profit.

Mr. Zuckerberg has 55 percent voting control over Facebook, according to the company's most recent proxy statement. So if investors do not agree with his vision, they don't have much choice but to sell. And many did. Facebook's shares were down 6.1 percent in afternoon trading in New York on Wednesday.

"Wall Street cares about the business model. We care less about changing the world," said Laura Martin, an analyst with Needham & Company.

Mr. Zuckerberg's emphasis on the company's long-term plans echoes similar pronouncements from other founder-controlled tech companies like Google and Amazon, which have periodically shocked investors with enormous investments in goofy-sounding projects like self- driving cars and video streaming services.

His comments, along with the disclosure that expenses could rise as much as 75 percent next year to help carry out that vision, overshadowed what was an otherwise great quarter for the company.

Facebook said third-quarter revenue grew 59 percent from the same period a year earlier, to $3.2 billion. Most of Facebook's revenue comes from advertising, and the company said about two-thirds of those dollars now come from ads on mobile devices, up from half a year ago.

"Our strong results show the shift to mobile is working," Sheryl Sandberg, Facebook's chief operating officer, said in an interview. "Our performance is very broad-based. …

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