Facebook Finds Out Wall Street Dislikes Big Investment | NBC Southern California
Press Here

Facebook Finds Out Wall Street Dislikes Big Investment

    processing...

    NEWSLETTERS

    AP
    FILE- In this Thursday, March 20, photo, Facebook CEO Mark Zuckerberg speaks at Facebook headquarters in Menlo Park, Calif. A research firm expects Facebook�s mobile ad revenue to soar this year, hitting nearly $1 billion a year after the company started to splice ads into its users� mobile phones and tablets. (AP Photo/Jeff Chiu)

    Wall Street doesn't want to hear about long-term investment or plans because most investors want to immediate gains. So when Facebook told investors that 2015 was going to be a "significant investment year" for the social network, its stock price plummeted.

    News of the company building up staff, beefing up ads and "scale up" its rent acquisitions caused investors to unload the stock, according to the Wall Street Journal. In fairness to investors, the news wasn't that great for a business model, either. Facebook is going to spend a lot of money -- and this comes from a startup that paid $21 billion for WhatsApp which has still made no money for the company (and actually lost about $140 million.)

    Investment is necessary in most tech companies. Facebook did receive about 18.2 percent return on investment, which is only a little less than Apple's 22.8 percent, but better than Google's 9.9 percent. Innovation doesn't come easily in big companies, so it often takes time and money to "stay relevant." Both Apple and Google have done so successfully.

    Google, who warned of "lumpy returns" has maintained profitability despite doubling a workforce and spending $10 billion in data centers. However, Google hasn't really bought a $21 billion messaging app that has not made any money for the company. Facebook likely needs a better strategy for growth and acquisitions, so perhaps it needs a closer look at Apple and Google's profitable business models.