Facebook revenue estimate slashed by 16% to $5B

eMartketer adjusts its revenue expectations for the social network as the stock hits all-time low

Even as Facebook continues to monetize and improve its mobile app entity, growth estimates for the company's advertising properties is dropping. According to a revised forecast from market researcher eMarketer, No. 1 social network will barely break $5 billion in revenues for the year, with a majority ($4.2 billion) coming from advertising and the rest from payments and other revenues. 

While that sounds like an obscene amount of money in almost any other context, that’s down $1 billion from the research firm’s estimate from last February. That is a substantial slash but still portrays a 34% increase this year from a year ago.

While this decreased estimate is coming out now, eMarketer does not single out mobile advertising, or the slowed effort to even create that subcategory, as a major factor.

The firm states that the estimate cut reflects growing concerns about the effectiveness and measurability of Facebook ads.

Just hours after eMarketer  pushed out this update, Facebook shares dropped to fresh all-time lows Friday morning with many looking at the upcoming November 14 lock-up expiration and analysts siting earnings misses.

Facebook shares this morning are down 71 cents, or 3.71%, to $18.38; the stock has traded as low as $18.23 on Friday (a new low). This places the stock at more than a 50% loss for the year, since it went public at $38 a share in May.

Companies siting Facebook  at a loss and lowering target prices include Bank of America/Merrill Lynch  and BMO Capital's analyst Daniel Salmon. Bank of America cut its target price on the stock down to $23, from $35. It sited risks from the slowing social gaming revenue and an increase in spending but states that the firm maintains its neutral rating on the stock.

BMO's analyst Salmon repeated his underperform rating and tore off $10 from his target price, placing it at $15, from $25. Salmon stated that this change was do to adjustments in Wall Street revenue estimates for the third quarter. And since Facebook did not publicly disclose any third quarter estimates in its first ever quarterly earnings report, analysts and investors have no company prices to factor into the mix.

“Major marketers are still questioning the effectiveness of advertising on Facebook, and they are concerned that their ability to measure results is underdeveloped,” eMarketer analyst Debra Aho Williamson said in the release. “Facebook is working on addressing these concerns, but it must move even more quickly.”

Despite the near constant changes, updates and options available on Facebook, including the ad exchange and mobile ad products, people continue to look at Facebook with concern.

Since paid advertising accounts for the vast majority of Facebook’s total revenue, though its share has been dropping over the past several years. Back in 2009, advertising accounted for 98% of the company’s intake, while this year that percentage is expected to fall to 83.9%.

Emarketer believes that revenues from Facebook payments and other sources will amount to $811 million this year, an increase of 45.6% over last year.

eMarketer based its updated estimates on the analysis of reported revenues from Facebook company releases; estimates from other research firms; Facebook usage trends; and eMarketer interviews with executives at ad agencies, brands, online ad publishers and other industry leaders.

(Image Source: Hothardware)