Facebook defies social media gravity with user, profit growth

TO PARAPHRASE Isaac Newton’s third law of motion, what goes up must, inevitably, come down. Now try telling that to Facebook. The social network on Wednesday reached the latest milestones in its quest to dominate the world, topping 1.79 billion monthly visitors as of the end of September, up 16 percent from a year ago. Facebook also added a record number of new daily users and said for the first time that more than 1 billion people regularly used its network exclusively on their mobile device every month.

Those numbers do not even include Facebook’s other properties, such as photo-sharing service Instagram and messaging service WhatsApp.

Facebook’s user growth defies the usual trajectories for social media companies, which often start strong out of the gate and then sharply slow down. Twitter, which added 4 million new visitors last quarter, now serves a user base roughly one-sixth the size of Facebook’s. Snapchat, while popular among young users, has about 150 million daily users, about half as many as Twitter.

That gives Facebook the major advantage of a giant and still fast-growing audience, an edge that Sheryl Sandberg, the company’s chief operating officer, acknowledged in an interview.

“We’re really pleased at the strong growth of the Facebook community,” Sandberg said.

The company’s strength in users, which is a major draw to advertisers, also fed Facebook’s financial performance. The company said sales totalled $6.82 billion for the third quarter, up 59 percent from a year ago. Mobile advertising revenue was particularly strong, accounting for 84 percent of all ad sales. Profit was $2.38 billion, nearly three times as much as a year ago.

Even so, investors were spooked by Facebook’s warning of a likely slowdown in revenue growth next year because of a decrease in what the company calls advertising load, or the number of ads that are inserted into the social network’s news feed. Facebook also said 2017 would be an “investment year”, with the possibility of increased costs in areas like hiring workers and spending on data centres.

Longer term, though, the trends remain favourable for Facebook. Web behemoths are increasingly reaping the benefits of a shift in advertising dollars toward digital outlets, which say they offer better ad targeting and ad delivery capabilities than traditional forms of advertising. In the first half of this year, digital advertising revenue grew 19 percent, largely because of Google and Facebook, according to the Interactive Advertising Bureau.

Much of Facebook’s recent advertising success has been driven by its video ad business, which has experienced tremendous growth over the past year. Facebook can command a premium on video ads. SocialCode, a digital advertising agency, said video ads accounted for some 47 percent of its clients’ Facebook and Instagram spending.

“People are creating and sharing more video, and we think it’s pretty clear that video is only going to become more important,” said Zuckerberg, Facebook’s chief executive. “That’s why we’re putting video first across our apps.”

That growth has not been without its stumbles. In September, Facebook revealed that it had inflated how much time its users were spending watching videos on the social network. The inaccurate figures were displayed to advertisers and publishers for more than two years, the company said. Facebook apologised for the error.

Yet the misstep does not appear to have slowed Facebook. In the third quarter, the company made $15.65 in revenue per user in the US and Canada, up from $10.49 a year ago.

Some of Facebook’s other properties are also showing growth. The Facebook chat app Messenger now has more than 33,000 active chatbots, which use artificial intelligence to connect users to brands, after starting its bot initiative this spring. And Instagram Stories, the company’s competitor to a similar feature used by its rival Snapchat, has gained 100 million active users since it started in August.

Newton’s laws of physics will ultimately catch up to Facebook.

But for now, that day still seems far off.