Don’t expect Facebook’s revenue growth rate to crank up anytime soon.
That’s the message that the company delivered to Wall Street during its Q2 earnings report on Wednesday. Finance Chief Dave Wehner said that the company’s advertising revenue growth, which has been driven by its mobile ads, is expected to decline “modestly” for the remainder of the year.
The declining growth rate isn’t in itself shocking. Facebook’s revenue growth rate has been declining for several quarters now, after peaking at more than 70 per cent year-on-year growth at the start of 2014.
As a company’s revenue gets larger, the numbers necessary to generate the same growth rate become ever-larger — the so-called law of large numbers. The year-on-year comparisons are also more difficult for Facebook now — one year ago, it was just ramping up its mobile ad business. And foreign exchange headwinds aren’t helping matters.
In the most recently ended-quarter, Facebook’s revenue expanded by 38.9% year-on-year to $US4.04 billion, which is still not too shabby. Google, which is of course a much larger business, posted revenue growth of 11 per cent in the second quarter.
Still, the fact that Facebook felt the need to stress this de-celeration is noteworthy. It means the company doesn’t foresee any new money-making initiatives picking up the slack in the near future. And given that Facebook did not provide any specific numbers for its revenue forecast, analysts will have to guess at how much of a slowdown in growth the topline is due for.
Here’s what Wehner said during the call:
“Since the first quarter of 2014, we have seen year-over-year advertising revenue growth rates decline each subsequent quarter. We expect this trend to continue in Q3 and Q4 as we continue to grow off a much larger base and face currency headwinds due to the strong dollar.”
In an answer to a follow-up question about the revenue forecast, Wehner used the word “modestly” to describe the expected revenue decline.
Here’s a chart of the company’s quarterly revenue by segment.
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