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Facebook forecasts fall in growth as adverts hit peak

Slower growth is despite better than expected third quarter earnings

The Facebook logo displayed on a screen in white text on a blue background

Facebook has warned growth will slow over the next quarter as the company seeks to re-evaluate its advertising strategies and increase investment in other areas.

The forecast sent shares falling by 7% on Wednesday, despite almost tripling its profits for the third-quarter ending at $7.01 billion net income.

The social media giant saw advertising revenue increase 59% year-over-year, generating $2.38 billion, 84% of which was delivered by mobile ads.

However growth would "meaningfully slow" due to limitations on the number of adverts the company is able to display without affecting user experience, chief financial officer David Wehner warned during a call to analysts, recorded by Reuters.

To increase revenue in other areas Facebook would need to invest heavily in 2017, according to Wehner.

"Adding top engineering talent remains one of our key investment priorities as we continue to execute on our three, five and 10-year roadmaps. In addition, we expect to grow capital expenditures substantially," said Wehner.

Facebook has already seen gains in its strategy for creating more video content, across both Facebook and Instagram, with plans to expand this to company's other apps. This will also involve investing heavily in infrastructure to make it easier to deliver video content to users.

"We had another good quarter," said Mark Zuckerberg, in an earnings statement. "We're making progress putting video first across our apps and executing our 10 year technology roadmap."

"We're prioritising putting video first across our family of apps and taking steps to make it even easier for people to express themselves in richer ways," added Zuckerberg in the analyst call.

A number of key revenue sources for Facebook remain relatively untapped. Their messaging service WhatsApp boasts more than 1 billion users but generates very little revenue for the firm. Facebook's drive into VR has also yet to take off, with disappointing sales of the Oculus Rift headset.

Facebook will also be looking to tap into a growing user base in the Asia-Pacific region, where the service still has a relatively small uptake, according to Wehner.

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