PALO ALTO: Facebook has enjoyed a profits boost from spending proportionally less on R&D than many of its tech rivals, new analysis has indicated.
Bloomberg reports that the social network has increased earnings by maintaining a relatively tight innovation budget, with its R&D spend equivalent to just 10% of total sales.
Facebook's profit margin grew from 19% of revenues in 2010 to 27% in 2011, a rise partially due to its relatively low engineering costs.
Analysts told Bloomberg that the social network's innovation strategy was similar to that of fellow tech giant Apple, which spends less than 2% of sales on R&D.
Ron Adner, a professor at the Tuck School of Business, commented: "We don't see any of the R&D spend by the app developers in Apple's numbers, but we see it in the result of the innovativeness ... Same thing with Facebook."
Though its engineering spend is low by the standards set by its peers, Facebook has nevertheless recently tapped its innovation budget to develop several significant new products and features in-house.
Data sourced from Bloomberg; additional content by Warc staff