Facebook profit soars, showing no sign of impact in Russia controversy
Facebook Inc reported better-than-expected quarterly profit and earnings on Wednesday because it pushed farther into video advertisements, showing no indication of financial damage from the controversy over how Russia used the social network in an effort to sway voters in the 2016 U.S. election.
The corporation’s shares, which hit a record earlier in the day, originally climbed in after-hours trading, but afterwards dropped into negative territory. They’ve gained almost 60 percent this year.
Chief Executive Mark Zuckerberg condemned Russia’s efforts to influence last year’s election through Facebook posts made to sow division, and repeated his pledge to ramp up spending significantly to raise the social network’s security, something he said on Wednesday would impact profits.
“What they did is wrong, and we aren’t going to stand for it,” Zuckerberg said of the Russians, on a conference call with analysts.
Facebook is at the middle of a political storm in america for the ways it manages paid political ads and permits the spread of false news reports. U.S. lawmakers have threatened tougher regulation and fired questions at Facebook General Counsel Colin Stretch in hearings this week.
Facebook, in a series of disclosures over two weeks, has stated that people in Russia purchased at least 3,000 U.S. political advertisements and printed another 80,000 Facebook articles which were viewed by as many as 126 million Americans over two decades. Russia denies any meddling.
Facebook’s total advertising revenue rose 49 percent in the third quarter to $10.14-billion, about 88 percent of which came from cellular ads.
Analysts on average had expected total ad revenue of $9.71-billion, based on analytics and data firm FactSet.
Facebook in the third quarter gave advertisers for the first time the capability to run advertisements in standalone movies, outside the Facebook News Feed, and the company is seeing good early results, Chief Operating Officer Sheryl Sandberg told analysts on a conference call.
“Video is exploding, and mobile video advertising is a major chance,” Sandberg said.
More than 70 percent of ad breaks around 15 seconds long were seen to end, most with the sound on, ” she said.
The 49 percent growth in overall ad sales in the most recent quarter compares with a 47 percent increase in the previous quarter and a 51 percent jump in the first quarter.
Facebook has been warning for at least a year about reaching a limit in “advertisement load”, or the amount of ads the company may feature in customers’ pages before compiling their News Feed.
Advertisers seem unfazed, however, spending heavily as the social network continues to attract users.
The nearly 50 percent jump in advertising revenue “is phenomenal, especially when for the last couple of quarters they have been trying to bring that anticipation manner, way down. Nevertheless it keeps going up,” Tigress Financial Partners analyst Ivan Feinseth said.
Of the Russia scandal enveloping Facebook publicly, Feinseth said: “In the larger picture, I do not think it’s a really major element.”
The provider’s performance was strong as compared with smaller social media companies Snap Inc and Twitter Inc , Wedbush analyst Michael Pachter said.
“Facebook grew revenues by $3.3-billion year-over-year for the quarter. This is more than Twitter and Snapchat generate combined for the complete year,” he said.
Facebook said about 2.07 billion people were using its support yearly as of Sept. 30, up 16 percent from a year before.
Analysts on average had expected 2.06 billion monthly active users, according to FactSet.
Net income climbed to $4.71-billion, or $1.59 per share, from $2.63-billion, or 90 cents per share.
Analysts on an average were expecting the company to earn $1.28, according to Thomson Reuters I/B/E/S.
Overall revenue increased 47.3 percent to $10.33-billion beating analysts estimate of $9.84-billion, according to Thomson Reuters I/B/E/S.
Various U.S. investigations into how Russia might have attempted to influence American voters in the months before and after last year’s elections are hanging over Facebook and its rivals.
There’s also suggested U.S. legislation which would extend rules regulating political advertisements on radio, television and satellite to also cover digital advertisements.
“We expect more scrutiny about Facebook’s ad system beforehand,” analyst Debra Aho Williamson of research firm eMarketer said in a note. “We are also monitoring for any signs that this investigation will have a material impact on advertising revenue.”
Courtesy: The Globe And Mail