| SAN FRANCISCO
SAN FRANCISCO May 4 Facebook Inc's
growth into a digital advertising power is showing a flip side:
The social network is more dependent than ever on the cyclical
ad market, even as its rival Google finds new revenue streams in
hardware and software.
Facebook reported on Wednesday that 98 percent of its
quarterly revenue came from advertising, up from 97 percent a
year earlier and 84 percent in 2012. Revenue from
non-advertising sources fell to $175 million in the quarter,
from $181 million a year earlier.
Facebook has warned for some time about declining non-ad
revenue. That part of its business consists almost entirely of
video game players on desktop computers buying virtual currency,
and it has fallen as gaming has moved to smartphones.
Facebook takes 30 percent of purchases, with the balance
going to companies such as Zynga Inc, maker of the game
The company's dependence on advertising is a long-term
concern but it has time to find other revenue while building its
core ad business, said Clement Thibault, a senior analyst at
"We have to remember it's still a fairly young business.
It's not like they're an old-fashioned business that needs to
move soon," he said.
A Facebook spokeswoman declined to comment.
Facebook's share price hit an all-time high of $153.60 on
Tuesday before dipping to close at $150.85 on Thursday.
The lack of diversification stands in contrast to Google, a
unit of Alphabet Inc. Its non-advertising revenue,
from sources such as cloud services and Pixel smartphones,
posted a 49.4 percent jump to $3.1 billion in the most recent
quarter and now represents 13 percent of Google's total revenue,
up from 10 percent a year earlier.
Facebook Chief Operating Officer Sheryl Sandberg said during
a conference call in February that the company was diversifying
revenue by expanding its base of advertisers across geographic
regions and industries.
Facebook's non-advertising products, such as its Oculus
virtual reality headset and the Workplace office software,
currently generate little revenue.
Some companies diversify through acquisitions, but most of
Facebook's purchases such as Instagram and WhatsApp have been in
Chief Financial Officer David Wehner said in a conference
call for investors on Wednesday that Facebook was not breaking
out Instagram revenue as a separate line in financial reports
because Instagram ads are sold through the same interface as
(Reporting by David Ingram; Editing by Jonathan Weber and Grant