Facebook CEO Mark Zuckerberg made it clear to investors on Wednesday that 2013 will be a year of growth and innovation, but perhaps not the kind that will help the company’s bottom line in the near future.
“We aren’t operating to maximize our profits this year,” Zuckerberg said on Facebook’s fourth quarter earnings call this week. “We’re doing what we think will build the best service and business over the long term.”
That includes a lot of hiring, especially in the area of product development. Facebook picked up 1,419 additional employees last year, and we’ve heard it plans to hire more than a thousand more this year. Zuckerberg says this is likely to lead the company’s expenses to grow at a faster rate than revenue will.
Although Zuckerberg didn’t say it specifically, part of more hiring means more acquisitions. In addition to the $521 million it spent on Instagram, the company reported spending $87 million on other business acquisitions last year. Facebook bought mobile gifting and commerce service Karma, which has become Facebook Gifts, but many other acquisitions are purely for talent, and founders and employees go on to work on completely new products at Facebook.
Product development is something that some say Facebook is struggling with, pointing to how the social network has copied a number of existing services, such as Snapchat, but it hasn’t completely innovated since f8 in 2011, when it announced Open Graph and Timeline. That’s likely because 2012 was a major transition period for Facebook. The company went public and devoted more resources for monetization, building its mobile ad business from $0 to more than $305 million in the fourth quarter, and introducing powerful new targeting opportunities such as FBX and Custom Audiences.
The other key focus for Facebook in 2012 was getting its mobile apps to a decent place. The company completely rebuilt its iOS and Android apps for speed and added some key features they had been lacking, such as a share button, multi-photo uploading and mention tagging in posts and comments. With that in place, Zuckerberg says the company is ready to innovate.
“You have a good version of all the Facebook features you know and want on your phone. So now the next thing we’re going to do is get really good at building new mobile-first experiences,” he said. “That’s going to be a big theme for us this year.”
Zuckerberg noted that not all of the product development and investments the company makes this year will immediately generate revenue.
“We’re at an interesting point in our evolution where there are lots of areas where we need to invest in. We need to build the best mobile experiences, we need to build our platforms and we need to build a really strong monetization engine. We can easily invest our entire engineering team just in building out the nuts and bolts of these areas today. But we also feel like there’s an imperative to start planting seeds for tomorrow’s businesses as well. Products like Graph Search that are in beta today but will hopefully grow up to be pillars of the Facebook service and businesses are things that we want to invest in aggressively.”