Facebook sees sharp drop in profits

Facebook has reported a sharp drop in profits, partly due to increased spending on research and development.

According to a British Broadcasting Corporation report, the social network site made a profit of $64m (£41m) in the final three months of 2012, compared with $302m a year earlier.

Revenue was up 40 per cent at $1.6bn, largely due to a big jump in advertising revenue, a quarter of which came from mobile platforms.

Shares in Facebook fell by almost six per cent in after-hours trading in New York.

The shares launched on the Nasdaq stock exchange in May at $38, and had halved in value by September.

They have since recovered to stand at $31 at the close of trading on Wednesday.

The drop in after-hours trading suggests the shares will fall back again when full trading resumes on Thursday.

“Mobile revenue was expected to be a little higher,” said analyst Aaron Kessler at Raymond James.

“Overall it’s a solid quarter but maybe [the company has suffered from] high expectations going into the quarter.”

Revenue from advertising was $1.3bn, 41 per cent up on a year earlier.

Mobile revenue, an important indicator of the company’s ability to capitalise on the growing move towards mobile platforms, accounted for 23 per cent of overall revenue.

-- Punch