Facebook’s rise in profits, users shows resilience after scandals

0
2842

Facebook, which generates revenue primarily by selling advertising personalized to its users, has demonstrated for several quarters how resilient its business model can be as long as users keep coming back to scroll through its News Feed and watch its videos.

Tighter regulation could make Facebook’s ads less lucrative by reducing the kinds of data it can use to personalize and target ads to users, although Facebook’s size means it could also be well positioned to cope with regulations.

Facebook and Alphabet Inc’s Google together dominate the internet ad business worldwide. Facebook is expected to take 18 percent of global digital ad revenue this year, compared with Google’s 31 percent, according to research firm eMarketer.

Total revenue was $11.97 billion, above the analyst estimate of $11.41 billion.

The Cambridge Analytica scandal, affecting up to 87 million users, generated calls for regulation and for users to leave the social network, but there was no sign that advertisers cared.

The results are a bright spot for the world’s largest social network amid months of negative headlines about the company’s handling of personal information, its role in elections and its fueling of violence in developing countries.

Facebook shares closed at $185.09 on March 16, the day that the Cambridge Analytica scandal broke after the bell on a Friday. In the days immediately afterward, the company lost more than $50 billion in market value.

Facebook Inc shares rose on Wednesday after the social network reported revenue that beat Wall Street estimates, showing no initial impact on its lucrative ad business from a scandal over the handling of personal data.

The company said it was increasing the amount of money authorized to repurchase shares by an additional $9 billion. It had initially authorized repurchases up to $6 billion.

Facebook’s quarterly profit also beat analysts’ estimates, as a 49 percent jump in quarterly revenue slightly outpaced a 39 percent rise in expenses from a year earlier. The mobile ad business grew on a major push to add more video content.

Chief Executive Mark Zuckerberg said in a statement that Facebook was “investing to make sure our services are used for good.”

Facebook said monthly active users in the first quarter rose to 2.2 billion, up 13 percent from a year earlier and matching expectations, according to Thomson Reuters I/B/E/ S.

Facebook said it ended the first quarter with 27,742 employees, an increase of 48 percent from a year earlier.

Analysts on average were expecting a profit of $1.35 per share, baseding on Thomson Reuters I/B/E/ S.

Shares traded up 4.6 percent at $167, paring a month-long decline that began with Facebook’s disclosure in March that consultancy Cambridge Analytica had harvested data belonging to millions of users.

Net income attributable to Facebook shareholders rose in the first quarter to $4.99 billion, or $1.69 per share, from $3.06 billion, or $1.04 per share, a year earlier.

Even if the company’s flagship social network, Facebook, suffers large reputational damage among advertisers or users, it still owns three more of the most popular smartphone apps in the world: Instagram, Messenger and WhatsApp.

” Everybody keeps talking about how bad things are for Facebook, but this earnings report to me is very positive, and reiterates that Facebook is fine, and they’ll get through this,” said Daniel Morgan, senior portfolio manager at Synovus Trust Company. His firm holds about 73,000 shares in Facebook.

LEAVE A REPLY

Please enter your comment!
Please enter your name here