October 4, 2012 / 1:05 PM / in 5 years

UPDATE 5-Facebook crosses billion threshold, on quest for growth

* Facebook confirms billion user mark, growth slows
    * Making money from users still the main challenge
    * Blogpost is latest charm offensive

    By Liana B. Baker and Gerry Shih
    NEW YORK/SAN FRANCISCO, Oct 4 (Reuters) - Facebook Inc
 passed the 1 billion user mark in September, a level of
global penetration that is a remarkable achievement for an
8-year-old social network and a heightened challenge to its
quest for sustained growth.
    Facebook, which has endured a bruising four months in the
stock market since a haphazard May 18 initial public offering,
has acknowledged that a slowdown in new-user acquisition is
inevitable as its worldwide reach expands.
    But doubts over whether the company can squeeze more and
more dollars out of each network member - given well-publicized
struggles to monetize the growing ranks of users who access
Facebook from mobile devices - have shaved more than 40 percent
off Facebook's value since its IPO, although shares still trade
at a lofty 45 times projected 2012 earnings.
    Thursday's announcement that Facebook crossed the billion
threshold on Sept. 14 confirmed expectations on Wall Street that
growth is actually trailing off. 
    The latest quarter's growth appeared likely to come in lower
in raw numbers, let alone by percentage, than the April-June
quarter's 54 million new users. About 45 million joined from the
start of July, when it had 955 million users, through Sept. 14. 
    And the previous quarter was way down from the 102 million
who joined during the first three months of 2012.
    In an interview on NBC's "Today" show broadcast on Thursday,
 CEO Mark Zuckerberg was asked by co-anchor Matt Lauer how, with
a billion users, the company wasn't "killing it" by making
    "It depends on your definition of 'killing it.' I mean, we
are making billions of dollars," Zuckerberg fired back.
    In its last earnings report, Facebook said revenue increased
by 32 percent to $1.18 billion in the second quarter. But that
marked the slowest pace of quarterly revenue growth since the
first quarter of 2011 - the earliest data available.
    Founded by Zuckerberg in a Harvard dorm in 2004, Facebook
took three years to reach 50 million users. By 2010, that hit
500 million. But with Google Inc launching its own
social network and other services from Twitter to YouTube vying
for Web surfers' time, the social network is keen to keep
rolling out new products to keep its members engaged.
    "The key, of course, is monetization of those users," Hudson
Square analyst Dan Ernst said.
    Facebook, stung by criticism over the efficacy of its ads,
concerns about its mobile business and questions over growth,
turned on the charm in the past month.
    Zuckerberg went on the offensive to soothe investors, making
his first public appearance since the May IPO on Sept. 11,
confidently talking up the company's mobile prospects and
hinting at new initiatives in search and e-commerce. It appeared
to work, stemming the share price's slide below $18. The stock
now trades above $21 - still well below its IPO price of $38.
    Zuckerberg said his company's new mobile ads were delivering
better results for advertisers than its traditional ads on
personal computers. 
    In addition, this week, Chief Operating Officer Sheryl
Sandberg and board member Marc Andreessen have appeared on the
CNBC business channel and panels at a high-profile advertising
conference in New York.
    The company said on its website it now has 600 million
mobile users, up from 543 million at the end of June. 
    "There's 5 billion people in the world who have phones, so
we should be able to serve many more people and grow the user
base there," Zuckerberg said. 
    As for his own phone habits, he said he owns several
devices, and called an iPhone 5 he received personally from
Apple Inc CEO Tim Cook "a wonderful device."
    Facebook's share price and persistent, skeptical scrutiny of
the company have taken a toll on its employees, many of whom had
counted on a big post-IPO payday. Zuckerberg acknowledged that
morale at the company could be better but said its 4,000
employees remained focused on building and improving Facebook's
    "We are obviously in a tough cycle now," he said. "That
doesn't help morale."
    Facebook has rolled out a spate of initiatives to spur more
growth, including a new advertising platform and measurement
methods to show marketers they are getting bang for their buck. 
    The company also said on Thursday it has seen 1.13 trillion
"likes," or endorsements by users, since it launched the feature
in February 2009. Many advertising campaigns that companies
conduct on Facebook are designed to garner "likes."
    But it is also exploring options beyond advertising, which
accounted for roughly 84 percent of the total revenue in the
second quarter. On Wednesday, the company also said it was
letting U.S. users pay a fee to boost the visibility of their
    Last week, Facebook unveiled a feature that lets U.S. users
buy and send gifts such as glasses, pastries and gift cards to
friends - signaling its intent to play a bigger role in
    On Thursday, Zuckerberg focused on what he called an
historic milestone: connecting about one in seven people on the
planet across both the developed and developing world.
    Facebook's number of users is larger than other social media
services such as Twitter, which has 140 million monthly active
users, and Google+, the Internet search company's year-old
social network, which has 100 million monthly active users.
    Google's overall Internet properties, including video
website YouTube, garnered 1.16 billion unique visitors in
August, according to data analytics firm comScore.
    Facebook was the world's No.3 most visited Internet
property, behind Microsoft online properties, with 821.5 million
monthly unique visitors in August, according to comScore's
figures, which do not include users accessing websites on mobile
    The median age of Facebook's users is 22. The five largest
user countries, which the company listed alphabetically, are
Brazil, India, Indonesia, Mexico and the United States.
    "Helping a billion people connect is amazing, humbling and
by far the thing I am most proud of in my life," Zuckerberg said
in his blog post.
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