If the proof is in the numbers, Facebook’s latest earnings report proves that however mad people said they were about the Cambridge Analytica scandal, it hasn't stopped them from logging into Facebook and looking at advertising on mobile.
Facebook dramatically beat analyst expectations when its quarterly results went up, with a showing that was better nearly across the board than what investors and market watchers had been expecting out of the world’s large social media (and second largest mobile advertising) platform. The market rewarded Facebook's dramatic overperformance, sending stock prices up 6 percent in after hours trading.
“Despite facing important challenges, our community and business are off to a strong start in 2018. More than 2.2 billion people now use Facebook every month, and more than 1.4 billion people use it every day,” Mark Zuckerberg told investors at the outset of the quarter call. “Our business grew 49 percent year over year to $12 billion in quarterly revenue. But as you know, we have important issues to address.”
Most of those issues, however, have little to do with Facebook’s qualitative performance.
By The Numbers
Facebook’s adjusted earnings per share clocked in at $1.69 — a wide beat on the $1.35 predicted by analysts. Total quarterly revenue was also a notable beat — $11.97 billion as opposed to the $11.4 billion that was the consensus prediction. That revenue figure also represents a 49 percent increase year on year.
Daily active users, despite the many calls for people to #deleteFacebook, increased by 49 million — and Facebook’s daily active user rate was 1.45 billion, exactly in line with analyst estimates. Monthly active users clock in at 2.2 billion, also in line with analyst estimates. And about a million of those new users were from the U.S. and Canada, reversing a lull in Q4 2018 that saw that group of users shrink for the first time. Average revenue per user hit $5.53 — better than the $5.35 forecast ahead of the earnings release.
The headline numbers — and the attention grabbers — were Facebook’s mobile advertising figures. Mobile is now responsible for 91 percent of Facebook’s advertising revenue (and thus, de facto, about 90 percent of Facebook's total revenue, as $11.8 billion of the nearly $12 billion in revenue Facebook logged during Q1 came via advertising.) As a point of comparison, back in Q3 2012 — when Facebook first started breaking out mobile data — the firm reported that mobile adds represented about 14 percent of their total revenue.
All in all, mobile ad revenue was $10.7 billion, up 60 percent year on year. In Q1, the average price per ad increased 39 percent, and the number of ad impressions served increased 8 percent, driven primarily by feed ads on Facebook and Instagram.
And, just to maybe soften its somewhat battered investors up a bit more, Facebook also announced Wednesday it would buy back $9 billion more in shares, after initially announcing a $6 billion buyback.
“2018 is going to be an incredibly important year,” Zuckerberg said on the call.
Despite a strong numerical result that shows just exactly how stable a duopoly Facebook and Google have around mobile advertising revenue, Mark Zuckerberg worked hard to convince investors on the earnings call that 2018 would also see the emergence of a new, more thoughtful Facebook.
“Beyond the investments we’re making to secure our platform, we’re going to invest even more in building the experiences that bring people together on Facebook in the first place,” Zuckerberg noted.
Zuckerberg also told investors that major changes to its security and privacy protocols were planned in advance of the Q1 tempest in a Congressional tea kettle, and that the firm plans to continue taking a “broader view” of its responsibility.
COO Sheryl Sandberg followed up, noting that — contrary to popular belief of late — Facebook does not “sell user information to advertisers” — it uses user information (among other sources) to target ads for advertisers, generally to great effect.
“Advertising and protecting people's information are not at odds,” Sandberg told investors. “We do both. Targeted ads that respect people’s privacy are better ads. They show people things that they’re more likely to be interested in. We regularly hear from people who use Facebook that they prefer to see ads that are relevant to them and their lives.”
Zuckerberg doubled down on that sentiment when answering an analyst call about potentially developing non-advertising revenue streams in the future. For Facebook’s purposes (and likely because they are so incredibly good at it) focusing on advertising as their main revenue generator is the business model best attuned to Facebook’s long term goals, according to its CEO.
“We want to offer that service for free and have it be affordable, and [advertising is] completely aligned with what we're trying to do,” Zuckerberg noted.
“So even when we do other things, like we’re running tests of payments, we have Marketplace which is growing and doing well, there may be other ways that we could think about making money from those — but in general, our strategy is to offer those services at cost and make it so that businesses can bid what it is worth to them to run ads in the system. We think that is both the most efficient way to run the business, it offers every business in the world the lowest prices that we can potentially offer, and it provides a great free service to people around the world.”
There was, however, some evidence that Facebook is thinking a bit more broadly about monetization. Sheryl Sandberg noted that Messenger, for example, with its massive popularity, will be an excellent place to gradually develop a revenue stream.
“We have over 18 million businesses now communicating with their customers through Messenger. We have 2 billion messages sent between people and businesses a month, which includes automated messenger. We're focused on launching new tools that help businesses use Messenger. For this quarter, we launched new quick replies for customers. We’re seeing ads in inbox, which are now available to all advertisers.”
Advertisers, Sandberg noted, “want to see a return for the money they spend.” Messenger’s ability to put an add in front of a customer that they can get one-on-one contact with — “that's been something that people are really excited about.”
And so, despite the predictions about the end being near for Facebook over the last month or two, we think it’s probably safe to stop writing those obituaries. Because — when it comes to mobile advertising and getting the message to consumers — Facebook is still getting advertisers “really excited.”