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Facebook in 1Q17: Live Sports, Ad Strategies, and Competition

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Part 9
Facebook in 1Q17: Live Sports, Ad Strategies, and Competition PART 9 OF 15

How Could Verizon’s AOL Impact Facebook’s Growth?

Growth warnings

When Facebook (FB) reports its 1Q17 results, which are expected to be released on May 3, one area investors could focus on is the company’s top line. There are two major reasons for that—the company’s own growth warnings in 2016 and a recent comment by the CEO of a respected advertising firm.

How Could Verizon’s AOL Impact Facebook&#8217;s Growth?

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Moving to new growth catalysts

Facebook warned in 3Q16, which it repeated in 4Q16, that it expects its revenue growth to slow in 2017 as it shifts to a different approach of growing its advertising revenues. The company said it would stop the practice of growing ad income by increasing the number of ads that appear on the users’ newsfeeds. Instead, it said future growth would be driven by adding more subscribers and encouraging them to spend more time on its social site.

Facebook’s revenues grew 51% in 4Q16 to $8.8 billion. The chart above shows the company’s quarterly revenue growth trend.

Marketers willing to bet on Facebook’s rivals

The second reason Facebook’s 1Q17 top line should be on the radar of many investors is that Sir Martin Sorrell, the CEO of advertising firm WPP, stated that marketers are showing increasing interest in advertising on rival platforms to Facebook and Alphabet’s (GOOGL) Google. Sorrell noted during a CNBC interview that Facebook and Google control ~75.0% of Internet ad spending.

However, marketers are willing to experiment with other ad providers such as Snap (SNAP), Amazon (AMZN), and Verizon’s (VZ) AOL. Verizon is acquiring Yahoo! and plans to combine the ad technologies from Yahoo! and AOL in an effort to pose a serious threat to Facebook and Google.

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