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Facebook Inc's User Growth Set to Slow Down Soon (FB)

Unlike its much smaller and more financially challenged rival Twitter (TWTR), Facebook has been able to consistently grow its user base by healthy margins each year. In the most recent quarter, Facebook's monthly active users (MAUs) increased by 15 percent to 1.71 billion. Twitter MAUs, by contrast, increased by just 3 percent to 313 million last quarter.

So why's Facebook the one with the problem?

The issue is that, simply due to its massive size, user growth can't continue to hum along at a 15 percent growth rate forever. There simply aren't enough internet users in the world; as time goes on, Facebook's user growth will more closely approximate the growth of internet users, which is currently about 7.5 percent and falling, according to internetlivestats.com.

It's a concept known as the law of large numbers, and it's something that Berkshire Hathaway (BRK.A, BRK.B) shareholders are intricately familiar with. Warren Buffett has been warning shareholders for years that as Berkshire gets larger, it's harder for him to earn a market-beating average. The days of 50 percent annual returns are long gone.

The fact that FB is growing at twice the rate of the internet is miraculous. But while 15 percent growth is impressive, we can already see how its girth has gotten in the way of its growth: Four years ago, when FB stock went public, Facebook was growing users at roughly twice its...


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