Facebook Inc offered reassurances to investors on Wednesday that its
digital ad business would remain highly profitable, despite a dip in
usage. FILE PHOTO | NMG
Summary
- The company said in an earnings report that quarterly revenue jumped 47 per cent from a year earlier, and executives said on a conference call that they saw more chances to make money even if people spend less time on Facebook.
- Analysts had wondered about the resilience of the world’s largest social media network, which is making changes to its products to deter foreign influence campaigns like ones that it says Russia has carried out and to stem the spread of sensationalism.
- Facebook added to jitters after the bell on Wednesday when, in its earnings report, it said that at the end of last year time spent by users had fallen by about 50 million hours a day.
Facebook Inc offered reassurances to investors on Wednesday that
its digital ad business would remain highly profitable, despite a dip
in usage on the social media network and an overhaul of its flagship
News Feed.
The company said in an earnings report that
quarterly revenue jumped 47 per cent from a year earlier, and executives
said on a conference call that they saw more chances to make money even
if people spend less time on Facebook.
Analysts had
wondered about the resilience of the world’s largest social media
network, which is making changes to its products to deter foreign
influence campaigns like ones that it says Russia has carried out and to
stem the spread of sensationalism.
Facebook added to
jitters after the bell on Wednesday when, in its earnings report, it
said that at the end of last year time spent by users had fallen by
about 50 million hours a day. Shares fell more than 4 percent in
after-hours trading.
Shortly afterward, though, Facebook executives expressed
optimism on the call with analysts, saying the changes they were making
in response to criticism would be healthy for the business in the long
term and might not even hurt much in the short term.
“I
want to be clear: The most important driver of our business has never
been time spent by itself. It’s the quality of the conversations and
connections,” Chief Executive Mark Zuckerberg said on the call.
The upbeat forecast led to a rebound in shares, which in late after-hours trading were up 1.4 per cent at $189.50.
Facebook
management “acknowledged things that maybe most investors weren’t
thinking about before - the reduction of users and usage - but at the
same time they pointed to a lot of positive trends on their other
platforms,” Pivotal Research Group analyst Brian Wieser said.
Although Facebook usage is down, he said, “One shouldn’t be reflectively negative on this.”
Chief
Operating Officer Sheryl Sandberg told analysts that recent changes to
reduce disinformation on Facebook could create “more monetization
opportunities.”
Sandberg said she was optimistic about
potential revenue from ads on “stories” on Facebook and Instagram, while
Chief Financial Officer David Wehner said the average price per ad
increased 43 percent in quarter.
“They said average
revenue per ad was up a lot, that quality of ads has improved, and that
the engagement declines were not meaningful,” Wedbush analyst Michael
Pachter said.
“In other words, better quality engagement and better ability to target ads. The street probably likes that,” he said.
Facebook
said that time spent was falling at the end of last year by about 50
million hours a day due to changes that it said reduced viral videos,
even before the company announced a series of changes to the News Feed
that may further reduce user engagement.
Facebook’s
1.40 billion daily active users was up 14 per cent from a year earlier,
but below analysts’ estimate of 1.41 billion for the fourth quarter,
according to financial data and analytics firm FactSet.
The
number of daily users in the United States and Canada fell for the
first time in Facebook’s history, dipping in the company’s home market
by 700,000 from a quarter earlier to 184 million. Wehner said the number
would “fluctuate” in the future.
Total revenue,
though, showed little impact, rising 47 per cent to $12.97 billion and
beating analysts’ estimate of $12.55 billion, according to Thomson
Reuters I/B/E/S.
Wehner reiterated Facebook’s earlier
guidance on expenses, telling analysts on the call that expenses would
likely grow 45 percent to 60 percent during 2018. The spending spree
includes thousands of new workers to review content posted by users.
The
overhaul of Facebook’s New Feed was prompted in part by its disclosure
last year that Russian agents used Facebook to try to sway American
voters from 2015 to 2017, an allegation that Moscow denies. Facebook
said 126 million Americans may have seen Russian-backed political ads
and posts.
In the fourth quarter, net income
attributable to Facebook shareholders rose to $4.27 billion, or $1.44
per share, in the fourth quarter ended Dec. 31 from $3.56 billion, or
$1.21 per share, a year earlier.
Excluding a tax
provision, the company earned $2.21 per share, topping analysts’
estimates of $1.95, according to Thomson Reuters I/B/E/S. Facebook said
it increased its provision for 2017 income taxes by $2.27 billion,
citing U.S. tax changes.
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