Facebook Inc. suffered a series of data and privacy scandals and controversies in 2018, its worst year in the public eye.
Have there been any actual consequences, though? Not according to what Facebook
showed off Wednesday.
The world’s largest social network reported record profit and revenue in the fourth quarter of 2018 that even went beyond the expectations of Wall Street, as advertisers continued to buy ads to reach users across both Facebook and Instagram. As Facebook was getting slammed for controversies throughout 2018, it was growing profit by 39%, to more than $22 billion, and increasing its revenue by more than 37%, to nearly $56 billion, for the full year.
The fourth-quarter results — nearly $7 billion in profit on revenue approaching $17 billion for the quarter, and actual growth in total users — may seem stunning to the average consumer after highly publicized threats to #deletefacebook during an annus horribilis that did not stop when the calendar flipped. Just a day before the earnings report, TechCrunch reported that Facebook paid younger users $20 a month for putting a research app on their phones that accessed all their data.
Wall Street expected the profit to continue though, and rewarded Facebook handsomely for getting there. Facebook shares surged 11.5% in after-hours trading on the results, after adding 14.8% in the past month as the S&P 500 index
“It was consistent with our survey and checks with advertisers, so not surprised [by the results],” Colin Sebastian, an analyst with Robert W. Baird, wrote in an email, contending that advertiser demand has remained stable.
Facebook Chief Financial Officer David Wehner may have said it best, when an analyst asked Wednesday about the tough press cycle the company had experienced in 2018: “I’d probably just let the numbers stand for themselves.”
However, Wehner did again warn about further revenue deceleration in 2019, as the company shifts its revenue mix toward ads in Stories, its visual storytelling feature for photos and videos that generates less revenue than ads in the News Feed. If Facebook can boost ad revenue from Stories, though, it could continue to perform better than Wehner’s warnings, which have been a regular feature of Facebook earnings calls even as the company has continued its unchecked growth.
Perhaps the biggest ramification Facebook has seen from all the issues it has faced is the amount of staffing hired to work on safety and security issues. Chief executive and co-founder Mark Zuckerberg told analysts that Facebook had 30,000 people working on safety and security in 2018, up from 10,000 a few years before. In addition, Facebook plans to continue its hefty capital spending plans to build out data centers, and expects total 2019 expenses will grow approximately 40% to 50% compared with 2018, to as much as $20 billion.
Those are the same predictions Facebook made throughout 2018, though — Zuckerberg has warned about how much Facebook is spending almost as much as he has apologized for data-privacy lapses in the past 12 months. And we now see the results, which are only positive for Facebook so far.
Concern about a backlash still exists. BTIG analyst Rich Greenfield contended on the call that the “elitist” communities of San Francisco and Silicon Valley — and a good chunk of Wall Street — believe the “ongoing narrative that nobody uses core Facebook Blue anymore and really, time spent is all about Instagram.”
Wehner responded that the daily active user trends show that Facebook is stable in developed countries and growing in emerging countries, and pointed out slight user growth in the U.S. and Canada, which Facebook had not seen in two quarters. But Facebook executives also said that at some point, they will no longer break out user data on Facebook, as they work to focus on the “family metrics” of all its services combined.
In a normal time, the investment community would bite back at Facebook for taking away data that is important for a company, much as it did when Apple Inc.
stopped providing iPhone unit sales. Facebook, though, has gotten away with hiding Instagram revenue for years, so why not give it a try?
After all, there appears to be no consequences for Facebook’s actions, judging by its overflowing bank account and growing 12-figure market capitalization.
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