By Adam Fraser
The quarterly blogger routine. Facebook announces results. Change the headline from last quarter’s blog post. Look for new ways to describe the strength of financial and operating numbers without it looking like a copy paste job from three months earlier. Publish.
Suffice to say it was another extremely solid set of quarterly results from Facebook.
However, unless you have been living under a rock, you would know the context is very, very different this time. Facebook is in the midst of a privacy/data sharing crisis in relation to Cambridge Analytica, third-party access to its user data and its overall vetting model relating to both content and ads. The rearview mirror reflects the undoubted strength of its market-leading operating position, but will it be plain sailing from here? For the first time in a long time, the jury is out on this one. Some say nothing much will change, others predict an awakening of consumer consciousness to all things privacy and a material decline in user numbers and engagement (as well as possible impacts on margins, based on increased costs from higher manual content review processes). And of course, the threat of regulation looms large from a number of angles, following Mark Zuckerberg’s recent testimony to Congress.
Firstly, to the numbers. If you want to dive into detail, you can find the detailed financials, investor presentation and management conference call. For those without the time to review all of the detail, here are 10 key sound bites from the results:
- Monthly active users reached 2.20bn from 2.13bn last quarter (2.8% growth) and 1.94bn a year earlier (13.4% growth).
- Daily active users hit 1.45bn from 1.40bn last quarter (3.4% growth) and 1.28bn a year earlier (12.9% growth).
- A fascinating quote from Mark Zuckerberg on the changes coming in the future: “We are going through every part of our relationship with people and making sure we’re taking a broad enough view of our responsibility – not just to build tools, but to make sure those tools are used for good. This means continuing to invest heavily in safety, security and privacy.”
- Consistent with its commitments announced in recent quarters, Facebook is doubling their team on security and content review to more than 20,000 by the end of the year. This includes content reviewers with specific language skills to detect hate speech.
- Between WhatsApp and Facebook Messenger, people now send almost 100 billion messages every day. They also do more than 3 billion minutes of video and voice calling every day, making the Facebook group by far the largest network for video calling.
- Total revenue was $12.0bn (exceeding market expectations) versus $12.9bn in the prior quarter (a 7.8% decline, noting the seasonal factor) and $8.0bn a year earlier (a massive 49.0% growth) – generating a net profit of $5.0bn (reminder – in a single quarter!).
- Facebook has a reasonably balanced global spread with just under 50% of revenue coming from the USA and Canada. While a ratio that has remained reasonably consistent over the past 4 quarters, the share from the USA is showing early signs of decline.
- Average revenue per user was $5.53 vs $6.18 last quarter and $4.23 a year ago. Note, revenue per user is significantly higher in the USA/Canada ($23.59) compared to Europe ($8.12) and the Rest of World ($1.68).
- Facebook ended the quarter with a cool $44bn in cash, enough to buy both Twitter and Snapchat!
- Some interesting random stats: 200 million people are now members of meaningful groups on Facebook. More than 80 million small businesses around the world are using Facebook Pages. Mobile Ad revenue was $10.7 billion (up 60% from last year), contributing approximately 91% of total ad revenue. Over 18 million businesses are now communicating with their customers through Messenger.
Note, mobile usage of Facebook has now become so prevalent that Facebook no longer separately discloses mobile users. While it did, the number of users accessing via a mobile device was consistently over 90%
With revenue growth, user growth, strong margins and consistent cash flow, this is another powerful set of quarterly results. The rate of growth inevitably slows at the scale Facebook finds itself, but for now, the cash cow continues to produce.
However, there are some troubling lead indicators abound. A respected survey showed a declining use of Facebook in the USA for the first time. Some sort of regulation seems inevitable. The overall impact of GDPR on the business remains uncertain. Relationships with the developer community are also in flux in the current climate.
For a business of this scale and might, it would be a brave man to “call the top” and predict material declines from here. Yet, with the privacy genie finally out of the bottle, and regulatory headwinds, the waters seem choppier from here than they have done for some time.