Explaining Facebooks bumper quarter
- Friday, February 1st, 2019
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Prash Naidu, CEO & founder of Rezonence, breaks down Facebooks record quarter, which was achieved despite facing numerous privacy scandals over the last year
Facebook’s bumper quarter seems to have many people scratching their heads. Didn’t they just have a horrible year with regards to various scandals and revelations? Surely this should’ve resulted in a bruised and battered set of user numbers and financials, so what went wrong (or right)?
On the earnings call, Justin Post from Bank of America Merrill Lynch asked the question: “… pretty rough press cycle in Q4. Did you see any impact in the US and Europe on engagement or usage or people closing their accounts? It certainly doesn’t seem evident in the MAU or numbers. But just anecdotally did you see any impact on that?”
David Wehner, CFO of Facebook, answered as follows: “Justin, about the impact of the press cycle, I would just probably just let the numbers stand for themselves.”
So let’s have a look at the numbers from Facebook’s Q4 2018 earnings presentation:
User figures in US & Canada and Europe increased (after small drops in the previous two quarters) to hit new all-time highs. Advertising revenues have increased in all regions but have grown particularly strongly in US & Canada and Europe where the press cycle was arguably the most negative.
Therefore, there’s only one answer, users didn’t care about all the negative PR and advertisers cared even less. I will leave the question of why users didn’t care to someone more qualified to answer, a psychologist perhaps but I will try and provide an explanation regarding advertisers.
Here again the answers lie in information revealed on the call. In her opening statement Sheryl Sandberg, COO of Facebook, pointed out that they now have over 7m active advertisers across their services. She also talks about how Facebook are constantly investing to improve targeting capabilities (using AI) whilst also ensuring that the process of running campaigns has been made easier. The end result, it’s easier to spend with Facebook and you get great ROI on your ad-spend.
Of the 7m advertisers, the majority are small businesses, they will be less concerned about ethics and more concerned about ensuring that their relatively meagre budgets deliver maximum results; Facebook certainly delivers.
Major advertisers might comment on being uncomfortable about what Facebook do but the platform simply has too much reach and audience attention for them to ignore. If one brand decides to stop investing in Facebook, they will almost certainly lose market share to their competitors. This is not something that shareholders would take kindly to.
The brutal fact here is that Facebook have built a hugely effective platform to capture human attention and sell it on to advertisers with highly accurate (and arguably privacy invading) targeting capabilities. It’s too addictive for most people to give up on and too efficient for most advertisers to ignore, a few uncomfortable facts aren’t going to get in the way.