Earnings

Facebook Expenses Rise 51 Pct As Regulatory Pressure Increases

Facebook

Facebook reported a 51 percent spike in its costs and expenses for the full year 2019 — that increase coming as the social media platform faces more questions from regulators and policymakers about its present and planned endeavors.

Facebook released its fourth quarter earnings and full year 2019 financials late Wednesday afternoon (Jan. 29), and reported that total costs and expenses hit some $46.71 billion during the recently completed year. For the fourth quarter of 2019, those costs and expenses increased some 34 percent year over year, to about $12.22 billion.

Facebook gave no immediate, official explanation for those increases — which did little to please investors Wednesday evening — but a deeper look at those financials show that during Q4, Facebook increased by nearly 23 percent its marketing and sales spending when measured with the same period from the previous year. Research and development spending increased by 35 percent year over year in Q4.

As those increases progressed throughout the year, the social media platform operator also reported a full year 2019 revenue increase of 25 percent, to some $21.08 billion. For the fourth quarter, revenue came in at $70.69 billion, up 27 percent year over year. Net income increased 7 percent in Q4 — hitting $7.34 billion — but declined 16 percent for the full year 2019, decreasing to $18.48 billion.

“We had a good quarter and a strong end to the year as our community and business continue to grow,” said Mark Zuckerberg, Facebook founder and CEO. “We remain focused on building services that help people stay connected to those they care about.”

Challenges to Come

Facebook faces some regulatory and related pickles in the coming month, not the least of which is the fate of its Libra cryptocurrency idea. Earlier this week, for example, news emerged that a former Chinese deputy governor has urged China President Xi Jinping to rethink his response to Libra after the U.S. hearing last October. Here’s the thinking behind the message sent to Xi: China has been looking at making its own CDBC since 2014. But Facebook’s announcement of its cryptocurrency coin Libra stoked alarm in other governments and agencies across the world. Officials in China are concerned that Libra could give the U.S. a bigger advantage on the world stage, especially since the Chinese yuan is not among the assets backing Libra.

Facebook, of course, still faces pressure and skepticism — and even loathing in some quarters — for the ways it handles user data and privacy in general (to say nothing of how it handles political ads and news as the U.S. prepares for the 2020 presidential election). But a look at the social media platform’s latest financial report finds that, when measured in December, Facebook’s daily active users stood at 1.66 billion, a year-over-year increase of 9 percent. As well, Facebook on Wednesday reported that its monthly active users, as of Dec. 31, stood at 2.5 billion, an 8 percent year-over-year increase.

Worldwide, average revenue per user stood at $8.52 in the fourth quarter of 2019, up 15.6 percent year over year. When boiled down to the U.S. and Canada, average revenue per user increased around 18.8 percent. Asia-Pacific experienced a 20.6 percent increase in average revenue per user, to $3.57, while in Europe the increase was 20.3 percent.

Payments Move

Facebook continues to make moves to gain a bigger slice of the global payments and commerce ecosystem. One example of that came late last year — during the fourth quarter of 2019 — when the social media platform announced the launch of Facebook Pay, a payment system meant to operate through Facebook, InstagramMessenger and WhatsApp.

“People already use payments across our apps to shop, donate to causes and send money to each other,” the company said. “Facebook Pay will make these transactions easier while continuing to ensure your payment information is secure and protected.” Users of Facebook Pay, which the company said is not related to its proposed cryptocurrency Libra, will be able to enter a preferred payment method and then use the option to eventually pay throughout all of the related apps.

It’s never easy to predict what’s really next for Facebook, but you can be sure it will try to increase its payments activity while also pushing hard to get buy-in on new products and innovation.

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