NEW YORK/SAN FRANCISCO, (Reuters) – Facebook Inc passed the 1 billion user mark in September, a level of global penetration that is a remarkable achievement for an 8-year-old social network and a heightened challenge to its quest for sustained growth.
Facebook, which has endured a bruising four months in the stock market since a haphazard May 18 initial public offering, has acknowledged that a slowdown in new-user acquisition is inevitable as its worldwide reach expands.
But doubts over whether the company can squeeze more and more dollars out of each network member – given well-publicized struggles to monetize the growing ranks of users who access Facebook from mobile devices – have shaved more than 40 percent off Facebook’s value since its IPO, although shares still trade at a lofty 45 times projected 2012 earnings.
Yesterday’s announcement that Facebook crossed the billion threshold on Sept. 14 confirmed expectations on Wall Street that growth is actually trailing off.
The latest quarter’s growth appeared likely to come in lower in raw numbers, let alone by percentage, than the April-June quarter’s 54 million new users. About 45 million joined from the start of July, when it had 955 million users, through Sept. 14.
And the previous quarter was way down from the 102 million who joined during the first three months of 2012.
In an interview on NBC’s “Today” show broadcast on Thursday,
CEO Mark Zuckerberg was asked by co-anchor Matt Lauer how, with a billion users, the company wasn’t “killing it” by making money.
“It depends on your definition of ‘killing it.’ I mean, we are making billions of dollars,” Zuckerberg fired back.
In its last earnings report, Facebook said revenue increased by 32 percent to $1.18 billion in the second quarter. But that marked the slowest pace of quarterly revenue growth since the first quarter of 2011 – the earliest data available.
Founded by Zuckerberg in a Harvard dorm in 2004, Facebook took three years to reach 50 million users. By 2010, that hit 500 million. But with Google Inc launching its own social network and other services from Twitter to YouTube vying for Web surfers’ time, the social network is keen to keep rolling out new products to keep its members engaged.
“The key, of course, is monetization of those users,” Hudson Square analyst Dan Ernst said.
STUNG
Facebook, stung by criticism over the efficacy of its ads, concerns about its mobile business and questions over growth, turned on the charm in the past month.