On Wednesday, Facebook Inc. displayed strong growth in the mobile advertising business. However, investors were rattled after Facebook stated that the frequency of ads shown on users' newsfeed would not be increased.
The number one online social network's shares soared to 15% in extended trading before its sudden drop to USD47.40. This is 3% down from the closing price of USD49.10 per share. Facebook stocks settled at USD49.16.
Back in July, Facebook would show one advertisement per twenty stories in users' newsfeed. Facebook Chief Financial Officer David Ebersman said the current ad frequency ratio, which is over 5%, would not be increased by the company. The comments made by the CFO, along with remarks that young teenagers used Facebook less than normal, had soured the mood shortly after Facebook topped Wall Street estimates with a 60% increase.
BTIG Analyst Richard Greenfield said, "There seems to be concern about the ad load not going up."
Yet, Greenfield believed the investors had been over-reacting. Greenfield also noted Facebook should have increased its advertisement prices rather than doing an increase in ad frequency.
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