Facebook’s Q3 results and the subsequent conference call provided shareholders a mixed bag of good and disturbing news. While it looks like the company is strengthening its revenue streams going into the future, it may also be on the brink of a debilitating loss of popularity in an important demographic. It was this combination of news that drove the company’s stock up 18% to $57.98 following the announcement of the results on Wednesday and then back down to $48.44 following the conference call a few hours later. The results definitely justified the jump in Facebook’s share price. Facebook’s profits doubled in Q3 to $621 million, and revenue grew by 60% to touch $2.02 billion compared with Q3 of the previous year. Of this $2.02 billion, around $1.8 billion came from advertising. And of advertising’s contribution to revenue, the company noted that mobile ads comprised almost 50% of the $1.8 billion, up from 41% qoq. This is what got shareholders so excited. Mobile revenues proved to be elusive for Facebook for far too long, and haunted the social network’s IPO as well. Now, with two consecutive quarters of strong growth, shareholders are more at ease about the company’s future.
But then the conference call happened and finance director David Ebersman revealed that though usage among US teens was stable (read no significant growth) and, notably, that there was a decline in daily users, “specifically among younger teens”. This news does not bode well for a social network that largely depends on the younger population for growth. Now, this is only the first quarter where Facebook has seen such a decline, and the decline itself is restricted to US teens—a notoriously fickle demographic. But that demographic often sets the trend for teenagers worldwide. Investors will keenly be awaiting next quarter’s results to see if this was an aberration or the start of a trend.