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Facebook's Q3 earnings exceed expectations, but Russia issues may harm future profit

Tyrone Stewart

Mark ZuckerbergFacebook soared beyond Wall Street predictions in the third quarter of 2017, with advertising revenue topping $10bn for the first time and profits hitting $4.7bn.

Ad revenue saw a 49 per cent year-on-year (YoY) increase compared to Q3 2017, with mobile ad revenue representing around 88 per cent of that total. Meanwhile, profits were up 79 per cent YoY.

Despite this, the company warned that future profitability could take a hit due to its investments in dealing with abuse and fake news on its platform.

“Our community continues to grow and our business is doing well,” said Mark Zuckerberg, Facebook founder and CEO. “But none of that matters if our services are used in ways that don't bring people closer together. We're serious about preventing abuse on our platforms. We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximising our profits.”

During an earnings call, Zuckerberg added: “I've expressed how upset I am that the Russians tried to use our tools to sow mistrust. We built these tools to help people connect and to bring us closer together, and they used them to try to undermine our values. What they did is wrong, and we are not going to stand for it.”

Away from the financials, Facebook’s daily active users (DAUs) and monthly active users (MAUs) saw a YoY increase of 16 per cent. DAUs were 1.37bn on average for September 2017, while MAUs were 2.07bn as of 30 September. Facebook’s photo sharing platform, Instagram, also passed 500m DAUs in the quarter.

“We have seen Facebook's stock price grow by over 50 per cent this year and it’s not showing signs of slowing. Recent projects like avoiding further ad saturation on the News Feed with ads on Instant Articles and Videos, and the platforms ever increasing 2bn user base makes it prime for rising digital ad revenue spend,” said Yuval Ben-Itzhak, CEO at social media analytics firm Socialbakers.

“Facebook’s expansion into additional markets such as Asia Pacific, will further expand its reach and continue to keep the social giant far ahead of its peers in regard to sheer volume and therefore engagement and potential ad revenue. However, the company must remain mindful of oversaturation and subsequently irritating users,” he continued.

“As another arm of Facebook, Instagram has also emerged as an advertising powerhouse creating significant revenue for Facebook, as we are seeing more and more marketers shifting their focus towards Instagram for both their organic and paid activity. The introduction of the Stories function is enhancing its relevance among brands and will continue to galvanise market share in the photo sharing arena. Instagram has clearly contributed to Facebook's numbers this quarter and will continue to do so in the future.”

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