Facebook's ambition may be the only real threat to its success. The social network continues to crank out higher profits, as more users check accounts daily and advertisers get comfortable with the mobile platform. One possible danger, though, is that the company wastes capital on risky long-term bets like artificial intelligence and virtual reality.
Quarterly figures show Facebook growing at an astounding pace. Revenue increased 59 per cent, and earnings rose even more, with margins growing seven percentage points over the past year, to 44 per cent.
While the number of users increased 14 per cent to 1.35 billion, total daily users were up 19 per cent to 864 million, as more people logged into Facebook through their phones and tablets. There should also be further revenue growth in store. Mobile devices account for a quarter of the time people spend with any media, but only about 11 per cent of advertising dollars are directed toward mobile.
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Of course, investors already expect great things. That's why analysts grumbled when company guidance suggested revenue would grow only 40 to 47 per cent next quarter. More worrisome, though, is the possibility that the company will go overboard in making speculative investments on the far-off future.
Over the next three years, Chief Executive Mark Zuckerberg said, the company aims to expand existing businesses. Over the next five, it will concentrate on using services like WhatsApp, Instagram and Messenger to connect people. And over 10 years, Facebook plans to focus on artificial intelligence and virtual reality as the means for making those connections.
The company's $22-billion gamble on WhatsApp - a firm with $10 million in revenue last year but $138 million in losses - is already a high-stakes bet on the future. Trying to figure out what technology will look like 10 years hence is even riskier. Investors may well wonder whether Zuckerberg's powers of prediction are up to the task.
