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Facebook Execs Warn That Ad Growth Will Slow, And Costs Rise, This Year

Deadline logo Deadline 5/3/2017 David Lieberman
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Facebook shares fell 2.4% in post-market trading after executives warned analysts that ad sales growth likely will slow “meaningfully” later this year while expenses increase by as much as 50% to pay for “significant infrastructure investments.”

CFO David Wehner said that desktop ad growth will slow in Q3 “when we begin to lap our efforts to limit the impact of ad blockers.”

As for expenses, he adds, “as we look into 2017 and beyond, there are going to be a number of initiatives we believe are valuable to the community and to the company in the long term, but are going to be net negative on our operating margin.” Capital expenditures this year could go as high as $7.5 billion “which is up over 50% compared to last year.”

CEO Mark Zuckerberg kicked off the quarterly briefing saying that the company is building data centers in Denmark and Nebraska, experimenting with internet services delivered by aircraft to unserved part of the world, as well initiatives to promote camera use and — related to that — augmented reality.

The camera “is becoming more central than the text box in all of our apps,” he says.

That will “open a great diversity of use cases,” for example using object recognition technology to help people shop, Zuckerberg says. “We were a little bit late” to the trend but “now we’re pretty much ahead.”

Earlier the company said that it would hire 3,000 people to join 4,500 employees who review what Zuckerberg called the “millions of reports we get every week”  involving inappropriate content. That followed instances where users posted videos of torture, suicides and — last month — a murder in Cleveland.

Zuckerberg says he also plans “changes to our news feed ranking to reduce the financial motivation to spread hoaxes.”

The point isn’t just to take content down: “It’s also about helping people when they’re in need on the platform,” he says.

The CEO is eager to promote a video tab as a destination for people who want to do their viewing on Facebook. That could include professional sports as an “anchor” — although he’d prefer to share revenues as opposed to paying a licensing fee.

COO Sheryl Sandberg predicts that advertisers will continue to shift dollars from TV to Facebook and other digital platforms — which she says make it easy to target messages and determine their impact on sales.

“The dollars shift with eyeballs, and we want to earn it from our clients and be the best dollar and the best minute they spend, and help them measure across channels,” she says. “Increasingly the question isn’t whether you can do without TV, but whether you can do without mobile.”

Zuckerberg says that he wants to create a “more civically engaged community” by helping people forge “meaningful groups” around shared interests such as parenting.

“My hope is to help more than 1 billion people join meaningful groups to strengthen our social fabric over the next few years,” he says. Facebook has built apps, for example for fundraising, but “it’s clear we have more to do here.”

Along with promoting civic engagement, Zuckerberg wants to build “ecosystems around products that people are already using.”

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