Fake news fails to hurt Facebook, profits double in Q4
With quarterly profit of $3.57 billion, more than double the $1.56 billion it reported a year ago, the company showed no signs of slowdown in growth. The results handily beat analysts’ expectations, and shares ticked up about 0.2% in after-hours trading.
The company had warned in November that ad growth would likely slow “meaningfully” due to limits on ad load – the total number of ads Facebook can show to each user. But there was little sign of that in the fourth quarter as total revenue soared to $8.81 billion from $5.84 billion a year ago.Read more ↓
“I think the rate of growth will decline, but it will remain very high,” said analyst Michael Pachter of Wedbush Securities. “They grew 57% in 2016, and our current model has ‘only’ 38% revenue growth in 2017. That’s still pretty impressive.”
Facebook suffered a slight setback just before the market close when a jury in Texas ordered Facebook, its virtual reality unit Oculus, and other defendants to pay a combined $500 million to ZeniMax Media, a video game publisher, for violating a non-disclosure agreement.
Chief executive Mark Zuckerberg told analysts on a call on Wednesday that the company expects a major ramp-up in hiring and other spending during 2017 as it invests in video and other priorities.
Zuckerberg said the focus would be on generating short-form, original videos, especially professionally created “episodic content” produced week-to-week.
Users should come to Facebook “when they want to keep up-to-date on what’s going on with their favourite show or what’s going on with a public figure,” he said.
US President Donald Trump used the service for that on Tuesday, when he broadcast his announcement of US Supreme Court nominee Neil Gorsuch on Facebook Live.
Threat to Netflix
The video push could ultimately pose a threat not only to YouTube, owned by Alphabet’s Google, but also to next-generation television companies like Netflix.
Facebook’s strong performance could also throw a shadow on the expected Snap initial public offering. Facebook competes with Snap chiefly through its Messenger service, and also with WhatsApp and Instagram.
The various Facebook apps have all been adding features rapidly to attract more users and retain those already on the network, and some of those features are clearly aimed at Snap.
Facebook has also been building new tools to stem the spread of fake news and partisan propaganda on the network, which emerged as a major issue in last year’s US presidential election.
Chief operating officer Sheryl Sandberg played down the impact of US election spending on the company’s finances. She compared it to the soccer World Cup or the Super Bowl and said it was not a “top 10 vertical” for the fourth quarter.
“No one event is that big for our business,” she said.
The company inched closer to reaching 2 billion users, saying that about 1.86 billion people were using its service monthly as of December 31, up 17% from a year earlier.
“We’re only going to do this in a way that we’re comfortable with in the long term,” he told analysts, adding that there would be “no news at all in the near term.”
Mobile daily active users rose 23% to 1.15 billion, the company said. More than 90% of Facebook’s users access the network through mobile devices.