Facebook’s share price fell by nearly 10% in after-hours trading before recovering slightly, despite reporting third-quarter revenues of $3.2bn, up by 58% compared with the same period in 2013.
The social networking firm also announced mobile advertising revenue grew to 66% of the total of $2.96bn, up from 49% of the total advertising revenue in the third quarter of 2013.
Advertising revenues in 2013 accounted for less than 50% of the total, while at the time of Facebook’s stock market debut in 2012, mobile ads caused investor concern because revenues were almost non-existent.
But, like rival microblogging site Twitter, Facebook’s investors were discouraged by predictions of slow growth in the fourth quarter.
Facebook Chief financial officer Dave Wehner forecast revenue growth would slow to between 40% and 47% in the fourth quarter from 59% in the third quarter.
"We believe we have very substantial growth opportunities in front of us and we plan to invest aggressively to capitalise on those opportunities," he said.
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The share price was also affected by a warning that Facebook expects costs and expenses to increase by 50% and 70% in 2015 as it looks to invest in talent and new areas like video, reported NBC News.
Costs in the third quarter also rose by 41% as Facebook added 1,200 new employees, including some from its $19bn acquisition of WhatsApp and its $2bn purchase of Oculus Rift.
For the first time, Facebook also disclosed the financial performance of the recently acquired WhatsApp messaging service.
According to a filing with the US Securities and Exchange Commission, WhatsApp lost $232.5m in the first six months of 2014, compared with a loss of $58.8m in the first six months of 2013.
Facebook reported the number of monthly active users is up by 14% compared with the same period in 2013, reaching 1.35 billion.
But again, like Twitter, growth appears to be slowing with an increase of just 2% in monthly active users compared with the previous quarter, with mobile proving to be the fastest growing segment.
We continue to focus on serving our community well and will continue to invest in connecting the world over the next decade
Mark Zuckerberg, Facebook
Facebook said the number of monthly active users logging in via mobile devices was 1.12 billion for the quarter, a 29% rise compared with the same period in 2013.
Facebook founder and CEO Mark Zuckerberg said it had been a good quarter with strong results.
"We continue to focus on serving our community well and will continue to invest in connecting the world over the next decade,” he said in a statement.
Facebook reported a profit of $806m, up by almost 90% compared with the third quarter in 2013 – in line with analysts’ expectations.
According to analysts, although the results were better than expected, Facebook’s challenge is to find ways of growing the company further.
Facebook, which is still heavily reliant on advertising revenue, is expected to take an 8% share of the $140.7bn global ad market in 2014, according to eMarketer, up from 5.8% in 2013.
By comparison, Twitter accounted for only 0.5% of global digital ad revenues in 2013, and that figure is expected to grow to 0.8% in 2014.
However, Facebook is still a long way behind Google, which has a 32% share of the global digital ad market, and that is expected to decline only slightly in 2015 to just below 32%.