MASTERCLASSING

Facebook posts record profit despite year of privacy scandals

Tyrone Stewart

Mark Zuckerberg F8

Facebook’s scandal-hit previous year hasn’t done much to affect the company’s bottom line as it reported record profit, while comfortably beating Wall Street estimates for revenue and earnings, in the final quarter of 2018.

The social network posted a profit of $6.88bn for Q4 2018, compared to the $4.27bn achieved for the same period in 2017 and the $5.14bn reported in Q3 2018. Meanwhile, revenue grew 30 per cent year-on-year (YoY) to reach $16.91bn – with around 93 per cent of this coming from mobile – and earnings per share came in $2.38. These figures both comfortably surpassed their expectations of around $16.39bn and $2.19 respectively.

The results highlight how Facebook is able to separate its successful business from its questionable practices and bad image – the most recent instance of this disregard coming this week when it was revealed that Facebook has been paying users as young as 13 for full access to their phone data.

Daily active users (DAUs) and monthly active users (MAUs) both grew nine per cent YoY. DAUs reached 1.52bn, while MAUs hit 2.32bn. Breaking this down, Facebook saw daily growth across all regions – putting an end to a downward trend in Europe and overcoming a plateau in North America – with monthly growth everywhere except in the US & Canada.

Across Facebook, Instagram, WhatsApp, and Messenger, the social network estimates that is has around 2.7bn people using at least one service each month, and over 2bn people using at least one of Facebook’s ‘family’ of apps every day. And these metrics could be the ones to take centre stage in the future.

“We believe these numbers better reflect the size of our community and the fact that many people are using more than one of our services,” said David Wehner, Facebook CFO, in the company’s earnings call. “For the time being, we will continue to disclose both set of numbers. But over time, we expect family metrics will play the primary role in how we talk about our company and we will eventually phase out Facebook-only community metrics.”

This call was used by Facebook CEO Mark Zuckerberg to highlight the “social issues” that his platform has experienced over the last year, seeming to frame the company’s problems as ones faced by the internet as a whole, stating, “For the past couple of years, most of our focus and energy has gone into addressing some of the biggest social issues around the future of the Internet… Right now, there's a lot of negativity about the impact of technology, and some of it's fair and some of it's misplaced. And we, in the tech industry overall, should be scrutinised heavily because we play a role in many people's lives”.

Zuckerberg pointed to the work that Facebook has already done to fix its problems, but assured it would continue working to make things better, while building more meaningful experiences, continuing to support businesses, and communicating more transparently about the things it is doing.

What the industry has to say…

Rakhee Jogia, VP of strategic partnership & supply at Rakuten Marketing
“These results are testament to Facebook continuing to empower brands with new advertising and ecommerce options across its portfolio of platforms. At a time when the high street appears vulnerable, updates like Shopping for Instagram have given all businesses new ways to connect with customers by expanding shopping in Stories. Meanwhile launching the test of a shopping channel in Explore, and further investment in video platform Watch, cements Facebook’s position as a challenger video channel. It’s important to remember there will be nearly 1.9bn Internet video users by 2021, a statistic that seems to have been adopted into the very core of Facebook’s global strategy. To this point, Facebook remains one of the few platforms that can claim a truly global presence - in 2019, the number of Facebook users in China is expected to reach 56.58m. This kind of reach presents enormous potential for Western brands looking to tap into lucrative markets overseas, which will undoubtedly continue to be a priority among businesses for years to come.”

Aaron Goldman, CMO at 4C Insights
“Facebook’s Q4 performance represents continued advertiser confidence in the company’s suite of platforms. Despite a challenging year, Facebook has continually increased value for brands through developments like the expansion of Shoppable Advertising in Instagram Stories and Explore as well as new platforms for improving ad targeting like Portal. In 2019, video will become an even bigger focus with formats like Stories taking centre stage across the Facebook Inc. portfolio, which includes Messenger and WhatsApp alongside Instagram and Facebook. We also expect growth with in-stream video as Facebook delivers more long-form, curated and original programming through Watch and IGTV. Overall, the Facebook family of apps is well-positioned to help marketers deepen their connections with engaged consumers.”

Yuval Ben-Itzhak, CEO at Socialbakers
“Facebook's record profits in Q4 are a clear indication that the platform and its family of apps continue to be the place where most consumer engagement is happening online.

“Instagram has seen phenomenal success, with our data showing ad placements increasing by 5.5 per cent while Facebook’s decreased by 15 per cent. In 2018 Instagram became the go-to app for brand engagement thanks to its exciting formats and ability to attract influencers. It's clear that overall, the Facebook family of apps has the breadth of formats and the reach marketers are looking for when it comes to engaging with their audiences and placing ads.

“In fact, our data shows that marketers are more aware than ever of the impact each platform has on their brand engagement, which goes some way to explaining the strong ad revenues this quarter. Marketers choose which platform to place their ads on in 86 per cent of cases, leaving only 14 per cent up to Facebook’s algorithm to decide. Knowing your audience has become simpler and more effective, leading to a strong quarter for Facebook.”