Facebook repeats warning about slower ad growth; shares drop

SAN FRANCISCO (May 4): Facebook Inc. executives tried to temper investor exuberance about sales-growth prospects, repeating a warning that there’s a limit to the number of ads it can show on its social network.

On a conference call following its first-quarter earnings report, the company said it expects revenue growth to be down “meaningfully” after it stops increasing the frequency of marketing spots in the news feed later this year to avoid driving away users. Facebook shares fell as much as 4.2% as that message overshadowed first-quarter sales that topped estimates and a 17% jump in monthly users to 1.94 billion.

With Facebook’s massive audience and its many options for brands to reach those consumers through its social, messaging and photo-sharing apps, the company has been one of the two main beneficiaries of an uptick in digital ad spending, alongside Google, especially on mobile phones. Yet it will take time for the company to prove that other bets, such as its heavy investment in video and other apps such as Instagram, Messenger and WhatsApp, can start contributing significantly to revenue in future quarters.

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