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Facebook Reports Robust Profit, Stock Bounces 12% After Earnings

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by Teuta Franjkovic · 4 min read
Facebook Reports Robust Profit, Stock Bounces 12% After Earnings
Photo: Marco Verch / Flickr

Facebook reported robust earnings and revenue that handily surpassed Wall Street expectations for the final quarter of 2018 despite heavy spending on safety and security.

Better-than-expected profit is a sign that digital advertisers were still flocking to spend money on the service in order to reach customers even after a series of high profile embarrassments for the world’s largest online social media network.

Revenue grew 30 percent from a year ago to $16.9 billion while the number of people using it monthly rose nine percent to 2.32 billion, Facebook said in its fourth quarter update.

Net profit for Facebook, which makes money from online advertising, was up a strong 61 percent from the same period last year.

Mark Zuckerberg, Facebook founder and CEO, in the company’s earnings release said:

“Our community and business continue to grow. We’ve fundamentally changed how we run our company to focus on the biggest social issues, and we’re investing more to build new and inspiring ways for people to connect.”

He also acknowledged that a lot of the business challenges were self-imposed. He said the company has made significant investments in shoring up privacy and protecting the platform even though those expenses have cut into the company’s profitability. He repeatedly mentioned the company’s openness to regulatory restrictions, a step no U.S. agency has yet taken.

Monthly active users of 2.32 billion matched estimates, while daily active users of 1.52 billion slightly exceeded estimates. Both metrics were up 9% over the year-ago period. Instagram Stories has passed 500 daily users.

Facebook Seems to Be Overcoming Ex-Difficulties

Despite the stellar financials, this has been a difiicult period for the social media giant. The company has been embroiled in a series of scandals revolving around its use of data and its role in spreading false information and fomenting a range of other misdeeds.

Bombshell reports by the New York Times, the UK’s The Guardian and PBS Frontline have had Facebook back on its heels, with execs testifying before Congress and attempting a media charm offensive to own up to mistakes.

Just for a reminder, last year was replete with major challenges for Facebook, starting with its biggest privacy scandal when Cambridge Analytica, a political data-mining that worked for the 2016 Trump campaign, accessed the private information of up to 87 million users.

That plus continuing fallout from fake news and Russian election meddling on Facebook led to congressional hearings; then came privacy bugs and even a hack. So far, this year hasn’t been much better when it comes to scrutiny from critics and lawmakers. On Wednesday, Facebook faced charges of deceiving users, including teens, it paid to download an app that extensively tracked their phone and internet use.

Richard Greenfield, an analyst at BTIG LLC in New York said:

“Between the intellectual tech press and the Washington elite, there’s a huge disconnect between the news and what the rest of the world is doing. Advertisers don’t listen to either of those groups — they listen to consumers. Most of Facebook’s advertisers have no other place to go with a return on investment this good.”

Integrity as a Safe Haven for Advertisers

COO Sheryl Sandberg also hit the make-good theme in her remarks saying:

“We have to earn back people’s trust — not with words, but with actions.”

She also emphasized the integrity of Facebook as an incubator of businesses and as a haven for advertisers. While many brands have had to re-examine their buys on Facebook now has seven million active advertisers, she said.

Executives on the conference call highlighted one of Facebook’s newer initiatives called Stories, saying that it has attracted 2 million advertisers and Instagram passed 500 million daily active users on Stories.

Jesse Math, vice president of display and social at ForwardPMX, said:

“Now, our advertisers are seeing very strong performance in Stories. Facebook has developed creative optimization tools. What works for feed, with the click of a button, works in Stories.”

He also added that Stories has moved from something of an underused part of Facebook’s ad platform to more of a competitive space.

However, the company did warn that revenue growth will slow because of shifts in its advertising business. Facebook has been running more promotions in messaging apps and in user posts called “stories” that only last 24 hours, because the main Facebook news feed is so popular it has less room to grow. Those newer ads are less lucrative at the moment.

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