Facebook reports third quarter earnings

Courtesy of WikiMedia Commons  MARK ZUCKERBERG, Facebook CEO, speaks about the value of patience to investors analyzing the recent WhatsApp acquisition.

Courtesy of WikiMedia Commons
MARK ZUCKERBERG, Facebook CEO, speaks about the value of patience to investors analyzing the recent WhatsApp acquisition.

Andrea Ricketti
Staff Writer

With the release of the iPhone 6 and Alibaba’s IPO, technology has been making headlines in the business world. Investors have been prospecting the potential to invest in new entities. A long-standing investor in novel technology has been Facebook. The company has always looked for new and innovative ways to turn over a profit. They have accumulated several applications, such as Instagram, and the recently added Facebook messenger. Facebook has typically invested efficiently in promising applications. However, their recent investments have been very slow in yielding a profit. Although it has been slow, the company is looking at the big picture and long-term profit.

Facebook has consistently said that it does not expect its high-profile investments to develop into sustainable businesses immediately. Executives understand the time and energy that it takes to develop. Mark Zuckerberg, the company’s chief executive, gave a pretty high threshold for how developed a product has to be before it has to start carrying its own weight in Menlo Park.

“For us, products don’t get that interesting to turn into businesses until we get about a billion people using them,” he told investors during Facebook’s quarterly conference call Tuesday, casually discounting pretty much every tech service that has ever existed.
In other words, expect patience from Facebook as it looks at ways to make money from WhatsApp, Instagram and Oculus Rift, as well as the social network’s own messaging and search products.

In filings Tuesday, Facebook gave various information about the finances of WhatsApp, which is a messaging service it acquired for $22 billion earlier this year. WhatsApp’s income comes entirely from small fees it charges a small percentage of its users.

Last year the income from that application was $10 million, and WhatsApp lost $138 million. To justify the sticker price, Facebook laid out how it valued the company. WhatsApp’s 600 million users were worth about $2 billion, its brand was worth $448 million and its technology was worth $288 million. Goodwill accounted for $15.3 billion.

Instagram’s user base is at about one-fifth of Facebook’s threshold for business relevance. The site has been showing advertisements for some time, but Zuckerberg dismissed a question about how that business is doing by saying that it is still early in Facebook’s development.

Despite the lack of profit, Facebook can afford to be patient because its core advertising business keeps exceeding expectations. The company reported revenue of $3.2 billion in the third quarter, up 59 percent from a year earlier, and turned a profit of $1.15 billion.

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