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Facebook user growth and revenue fall short of estimates

Tyrone Stewart

FacebookFacebook had its second consecutive quarter of mixed quarterly results – as it fell short of estimates for user growth and revenue but performed better-than-expected in terms of profit – but, seemingly, successfully navigated what was a turbulent third quarter.

The social network ended the quarter with 2.27bn monthly users, up on the 2.2bn reported in the previous quarter but down on the 2.29bn predicted on Wall Street. Meanwhile, daily active users (DAUs) came in at 1.49bn, below expectations of 1.51bn despite being up nine per cent on the same period last year and increasing from the 1.47bn DAUs in Q2 2018.

Breaking down the active user numbers further shows that user rates in Europe and North America remained more-or-less static, with growth coming elsewhere in the world. In an earnings call, Facebook CEO Mark Zuckerberg said that these user growth figures were a sign that Facebook “may be close to saturated in developed countries”.

Facebook’s revenues grew 33 per cent year-on-year to $13.73bn, short of analyst expectations of $13.78bn. Although, its earnings per share for the quarter was well above estimates – $1.76 compared to $1.47 expected.

In order to address revenue struggles, Facebook will look to focus on shift marketers to its Stories, messaging, and video offerings – due to the amount of time users spend in each of these areas beyond the standard news feed – but getting it right will be difficult, particularly on Stories, according to Zuckerberg.

“I want to be upfront that even assuming that we get to where we want to go from a Feed only world to a Feed plus Stories world, it will take some time in our revenue growth may be slower during that period like it was while transitioning our products to mobile,” he said.

What the industry says…

Aaron Goldman, CMO at 4C insights
“Facebook’s growth is rooted in a history of disrupting its own model with innovations like News Feed and the transition from desktop to mobile. With Stories, the company is once again creating disruption across its platforms. But it’s a format that can serve both consumers and advertisers well. Ads in Stories are driving growth on Facebook and Instagram, with spend increasing at a faster rate than traditional feed ads compared to the beginning of 2018. We’re also seeing CPMs for ads in Stories increasing, suggesting advertisers are seeing value from the ad unit and willing to pay a higher margin. As these placements continue to gain adoption, they will become a strong revenue driver for Facebook and a trusted format for brands.”

Debra Aho Williamson, principal analyst at eMarketer
“Although revenue came in slightly lower than Wall Street expectations, it wasn’t a significant shortfall. Importantly, Facebook grew revenue at a nice pace in the important US and Canada markets. Facebook also managed to eke out a small usage gain in the US and Canada. After the flatness we saw last quarter, that’s a good sign. The 1 million QoQ decline in Europe users was likely a continuation of the fallout of GDPR we saw last quarter. Overall, given all the challenges Facebook has faced this year, this is a decent earnings report.”

Yuval Ben-Itzhak, CEO at Socialbakers
“Despite mixed results, the Q3 earnings have shown yet again that for marketers, no other platform comes close to Facebook and its family of apps in terms of scale and audience engagement. With 2.27 billion monthly active users, it is still the platform where most consumer engagement with brands is happening online.

“It is also no surprise that private messaging and Stories are the current growth drivers for the business. With the increased desire for privacy, users are looking more and more towards services like Messenger and WhatsApp to interact with brands and organisations in a safe and convenient way.

“With Facebook focusing its investment on the biggest opportunities for advertisers, video, communities and messaging, it's hard to imagine that its future as the leading advertising powerhouse looks anything other than bright.”