Facebook jumps on strong first quarter, strength in advertising
If you got all your information about social media giant Facebook from media headlines, you could be forgiven for thinking it was a company on the ropes. As its recent quarterly earnings report shows, nothing could be further from the truth. This week, the company released earnings that beat expectations, demonstrating that Facebook’s underlying business remains strong and is continuing to grow. On an earnings call, founder and CEO Mark Zuckerberg also explained that the company is not floundering strategically – it knows exactly what it wants to do, and how to do it.
Facebook’s shares have soared after earnings, continuing this year’s positive streak (+46%)
Source: Yahoo Finance#
For the first quarter of 2019, Facebook returned earnings of 85c per share. Due to a significant “one-time charge” it’s pointless to compare this to analysts’ expectations, or its own performance last year. However, other metrics remain useful: the company easily beat on revenue ($15.08 billion against $14.98 billion), and saw growth in average revenue per user ($6.42 against expectations of $6.39 – a 16% rise against the year-ago quarter).
This last fact is important: even when Facebook is being dragged over the coals by the media and lawmakers, it’s managing to not only maintain the revenue it generates per user, but increase it. That’s a clear sign that Facebook is not only growing the number of users on its platform (it met expectations in this regard), but that its business is maturing successfully.
Success in Facebook’s advertising business (which you’ll know the ins-and-outs of, if you read this newsfeed regularly) and particularly in its new “stories” feature are what drove results last quarter. On advertising, there’s not much to add – you know how it works, and it continues to be successful. But “stories” is indicative of a bigger trend that the company plans to capitalise on. On Facebook’s earnings call, Zuckerberg explained this strategy:
“The basic idea here is that in our lives we all have public spaces like the town square and private spaces like our living rooms. In our digital lives, we also need both public and private spaces. For the last 15 years, Facebook and Instagram have become the digital equivalents of the town square where you can do almost anything you want with lots of people at once […] They aren’t just tools for sharing one thing; they’re these whole rich platforms for lots of ways to interact in larger communities.”
“Today, people increasingly want the intimacy of connecting privately as well. So, I think there also needs to be a digital equivalent of the living room – a platform just as built out with all of the ways you’d want to interact privately. We already see that messages, small groups and Stories are by far the fastest growing areas of online communication. And we also know that people want additional tools for private interactions like payments and commerce.”
Dominion holds Facebook in its Global Trends Ecommerce Fund.
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