Facebook reports record profit


  • Corporate News Premium
  • Thursday, 31 Jan 2019

Facebook is testing events integration into Stories. — AFP Relaxnews

FACEBOOK Inc posted record profit in the fourth quarter, showing the resilience of the social-media giant’s business even as it battles through a string of challenges.

The strong financial results indicate that advertisers continue to see Facebook as a powerful platform for reaching consumers, and that users aren’t abandoning the company in large numbers, despite the negative headlines surrounding it.

Facebook reported per-share earnings of $2.38 in the fourth quarter, typically the heaviest spending period for advertisers, up from $1.44 a year earlier and beating analyst projections of $2.18, according to FactSet. Facebook’s net income rose to $6.88 billion from $4.27 billion.

Revenue rose 30% to $16.91 billion, exceeding expectations of $16.40 billion. The percentage increase marked Facebook’s slowest revenue growth yet. Still, the growth is significant for a company seven years after its IPO.

Following the fourth-quarter report, Facebook’s stock rose 8% to about $163 in after-hours trading. Before Wednesday, Facebook shares had fallen about 34% since the company’s July earnings call, when Facebook warned of slowing revenue growth and rising expenses due to increased investment in security measures.

“It’s an end to what was a difficult and challenging—but I think really important—year for Facebook,” said Sheryl Sandberg, Facebook’s chief operating officer, in an interview. “We have a lot of work ahead of us.”

increased investment in security measures.

“It’s an end to what was a difficult and challenging—but I think really important—year for Facebook,” said Sheryl Sandberg, Facebook’s chief operating officer, in an interview. “We have a lot of work ahead of us.”

The fourth quarter caps one of the most trying years in Facebook’s 15-year history. Violations of user trust in March morphed into a figurative referendum on how Facebook handles its users’ information and the influence it wields as gatekeeper of the world’s second-largest place to advertise online. Chief Executive Mark Zuckerbergtraveled to Washington to discuss how his company approaches user privacy with lawmakers, who signaled they were prepared to regulate his collection of sites.

Facebook is projected to control 20.5% of the digital ad-market this year, behind Alphabet Inc.’s Google, which is expected to account for 31.3%, according to research firm eMarketer.

On Tuesday, Facebook faced fresh anger from users, lawmakers and other tech giants following revelations about how the company targeted teens in a study to learn more about their habits. Facebook paid these teens $20 a month to download an app that collected sprawling personal data. News of Facebook’s efforts to collect information about teens was first reported by TechCrunch.

Apple Inc. said it revoked Facebook’s permission to maintain a research app because it said the app broke its rules about data collection.

Overall, more than 1.5 billion people use Facebook every day, and 2.3 billion use it monthly. Those figures were roughly higher than expectations. Overall, more than 2.7 billion people use the company’s family of services—including Facebook, Instagram, WhatsApp and Messenger—each month.

Facebook is pushing users toward stories, a new section of its app, in an attempt to beef up an additional place on its sites to serve advertising to users. Stories shows full-screen video and photo montages and was originally pioneered by Facebook’s smaller competitor Snap Inc.

“Last year was grueling for Facebook, but advertisers are still flocking to the platform,” said Jim Cridlin, head of innovation at WPP’s Mindshare.

Facebook also has apps that plenty of people use, but that don’t make the company significant money. Its WhatsApp messaging product, for example, has 1.5 billion monthly users, and last year Mr. Zuckerberg detailed plans to sell advertisements on the service. While advertising revenue growth at Facebook is slowing overall, a new platform to sell ads could help reverse these trends.

“The challenge will be to monetize Facebook’s other assets without turning consumers off,” Mr. Cridlin said.

Previously, Facebook has managed to turn its other properties into moneymaking enterprises. Instagram, Facebook’s photo-sharing app, is expected to generate $14.38 billion in ad revenue this year, according to research firm eMarketer.

Facebook also is investing in tools and systems to stop the misinformation and abuse that made 2018 a catastrophic year for the company. Investors have expected these expenses to constrict Facebook’s operating margin, which shrank to 46% from 57%. - WSJ

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