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Facebook revenue beats estimates as ad sales continue to grow despite Cambridge Analytica scandal

Facebook shares jumped as high as $168.20 after closing unchanged at $159.69 in regular New York trading. The stock has dropped about 14% since the new reports about data-privacy lapses emerged in March.

business Updated: Apr 26, 2018 10:59 IST
Sarah Frier
Sarah Frier
Bloomberg
Facebook earnings,Facebook Q1 results,Facebook results
Facebook has spent the past month explaining, apologizing and tweaking its rules after an app developer passed along personal information on as many as 87 million users to Cambridge Analytica.(REUTERS File Photo)

Facebook Inc. has been embroiled in one controversy after another. But ad sales are near records and users keep flocking to the social network.

First-quarter revenue rose 49% to $11.97 billion, beating the $11.4 billion average analyst projection, according to data compiled by Bloomberg. In a statement Wednesday, Facebook said it now has 1.45 billion daily users, matching estimates on this key measure of engagement. Shares surged more than 5% in extended trading.

Facebook has spent the past month explaining, apologizing and tweaking its rules after an app developer passed along personal information on as many as 87 million users to Cambridge Analytica, a political consulting firm, which may have failed to delete it. That crisis, which resulted in a #deleteFacebook campaign and a congressional inquiry for Chief Executive Officer Mark Zuckerberg, hit toward the end of the quarter -- so its implications may have had little visible impact so far. Still, the company’s persistent growth points to the strength of its digital-ad business, despite growing concerns from advertisers, users and lawmakers in the past year.

“Facebook continues to have a long revenue runway ahead of it,” Mark Mahaney, an analyst at RBC Capital Markets, said in a note to investors. “Marketers continued to spend on the platform at record highs. And we believe actions that lead to revenues speak louder than words.”

The company’s main social network added users in North America, reversing the decline that happened for the first time ever in the fourth quarter. Monthly active users in the US and Canada rose to 241 million, while daily active users climbed to 185 million in the first quarter.

Facebook shares jumped as high as $168.20 after closing unchanged at $159.69 in regular New York trading. The stock has dropped about 14% since the new reports about data-privacy lapses emerged in March.

Net income in the first quarter climbed 63% to $4.99 billion, or $1.69 a share, topping the $1.35 per share analysts predicted. Capital expenditures reached $2.81 billion in the quarter as Menlo Park, California-based Facebook increases its spending on security, video content and new technologies. The company also said it boosted its stock-buyback program by $9 billion.

Facebook still holds a dominant position in mobile advertising, alongside Alphabet Inc.’s Google. That has let the company increase the price of ads -- Facebook said mobile made up 91% of ad revenue in the recent period, compared with about 85% a year earlier.

Facebook also has plenty of properties where it’s starting to make more money beyond the main social network, like the popular chat apps WhatsApp and Messenger and the photo-sharing app Instagram, which is expected to reach a billion users this year.

The company also has plenty of properties where it’s starting to make more money beyond the main social network, like the popular chat apps WhatsApp and Messenger and the photo-sharing app Instagram, which is expected to reach a billion users this year.

Still, the company has been rocked internally by the data crisis, which has caused Facebook to launch a review of all of its products and evaluate how much information it should share with app developers, researchers and advertisers. Meanwhile, it’s working to address new privacy regulation from Europe, which Facebook has said could reduce the amount of daily users from that region.

The company may no longer be able to build products quickly and roll them out without concern for their potential negative impact. Zuckerberg has said that the company failed to take a broad enough view of its responsibility to users. Facebook will be staffing up this year to review potentially damaging content more quickly and better understand possible security threats. And it’s put a hold on launching some products, including a home speaker device, while it does a deeper security review.

Facebook in January announced that it was tweaking its news feed algorithm to put an emphasis on posts from friends and family, at the expense of viral news and video. That could reduce the amount of time people spend on the site, the company has said.

First Published: Apr 26, 2018 10:58 IST