What's going on?

Facebook racked up some serious �likes� on Wednesday as it beat investors� expectations (tweet this). Its user, revenue and profit growth charts in the third quarter all pointed to the upper right, while management highlighted video and security as areas of focus.

What does this mean?

Facebook makes most of its money by showing users ads. So the more time people spend on its apps (Facebook, Instagram and Messenger) and the more ads it can put there, the more money it makes. The company reported higher user growth than research analysts were predicting, but has been warning investors for over a year that the number of ads it can show people without crowding their News Feeds is approaching its limit. However, this doesn�t appear to have happened yet: Facebook achieved almost 80% profit growth and almost 50% revenue growth. And all that revenue wasn�t just from gaining new users: Facebook is making more per user too, supported by the rise of video ads (which are more expensive).

Why should I care?

The bigger picture: Original video content is an increasingly important battleground in tech.


Netflix, Apple and Amazon are all increasing the amount they spend on original video content as a way to keep users engaged. Facebook is now joining the party with Facebook Watch, where users can watch original shows. Increasing the time you spend watching video on Facebook-owned apps gives the company more space to sell video ads, which the CEO has said are key to its business prospects.

For the stock: Facebook will be ramping up its costs next year.


Earlier this week Facebook said it would double employees working on security issues; original content is another big area Facebook plans to splurge on (see above). All of this spending (Facebook expects operating costs to increase by 45-60% next year!) could affect Facebook�s ability to maintain its profit growth, as CEO Zuck warned on Wednesday.