A report by the Head of Technology Research, GBH Insights, Daniel Ives, envisaged that this trend would linger until investors were assured of the growth potential of the investment in 2018 and beyond.
“This higher investment profile could be a lingering cloud over Facebook’s shares in the near term until investors can get further comfort that these investments are fuelling the next phase of the company’s growth story for 2018 and beyond with margin improvement hopefully set to kick in for 2019,” Ives said.
Facebook, in its 2018 financial year outlook, anticipated that it would be an investment year and forecast a total expense growth of 45 per cent to 60 per cent.
The company attributed the increase in spending to the hiring of more employees to work on security and safety and payments Facebook would make for shows in its recently unveiled Watch tab.
The analyst said the strategy was prudent even though investors were averse to the term ‘investment year.’
Ives advised the technology company to invest in initiatives that would drive revenue this year and beyond.
He said, “Facebook must invest in newer growth initiatives in our opinion, to further expand its drivers around ad growth rates, mobile platform expansion, video, consumer engagement, and Instagram/Messenger monetisation into 2018 and beyond.
“This is an integral part of Facebook’s strategy that we expect to play out over the coming years despite worries on the street around a stepped-up investment profile for the coming year.”
Commenting on the Instagram growth and monetisation, Ives stated, “With this platform on pace to be over one billion monthly active users by first half of 2018 based on our estimates, we view this an underappreciated asset by the street that could be a major growth catalyst for Facebook over the next 12 to 18 months on the advertising front.”
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