Facebook has grown its revenue by a whopping 57% in 2016
FACEBOOK cruised past Wall Street’s earnings and revenue expectations yesterday with strong growth in its mobile ad business, demonstrating that controversy over so-called “fake news” and inaccurate advertising measurements had little impact on its financial performance.
With quarterly profit of $3.57 billion (R48.04bn), more than double the $1.56bn a year ago, the company showed no signs of slowdown in growth. The results handily beat analysts’ expectations, and shares ticked up about 0.2 percent in after-hours trading.
The company had warned in November that ad growth would likely slow “meaningfully” due to limits on ad load – the total number of ads Facebook can show to each user. But there was little sign of that in the fourth quarter as total revenue soared to $8.81bn from $5.84bn a year ago.
“I think the rate of growth will decline, but it will remain very high,” said analyst Michael Pachter of Wedbush Securities. “They grew 57 percent in 2016, and our current model has ‘only’ 38 percent revenue growth in 2017.”
Facebook suffered a slight setback just before the market
close when a jury in Texas ordered its virtual reality unit Oculus and other defendants to pay a combined $500 million to ZeniMax Media, a video game publisher, for violating a non-disclosure agreement.
But the company’s core business continued to power ahead as mobile advertising accelerated; it now accounts for 84 percent of ad revenue, up from 80 percent a year ago.
Chief executive Mark Zuckerberg told analysts on Wednesday that the company expects a major ramp-up in hiring and other spending during 2017 as it invests in video and other priorities.
Zuckerberg said the focus would be on generating shortform, original videos, especially professionally created “episodic content” produced week-to-week.
Users should come to Facebook “when they want to keep up-to-date on what’s going on with their favourite show or what’s going on with a public figure,” he said.
Threat US President Donald Trump used the service for that on Tuesday, when he broadcast his announcement of US Supreme Court nominee Neil Gorsuch on Facebook Live.
The video push could ultimately pose a threat not only to YouTube, owned by Alphabet’s Google, but also to next-generation television companies like Netflix.
Facebook’s strong performance could also throw a shadow on the expected Snap initial public offering. Facebook competes with Snap chiefly through its Messenger service, and also with WhatsApp and Instagram.
The various Facebook apps have all been adding features rapidly to attract more users and retain those already on the network, and some of those features are clearly aimed at Snap.
Facebook has also been building new tools to stem the spread of fake news and partisan propaganda on the network, which emerged as a major issue in last year’s US presidential election.
Chief operating officer Sheryl Sandberg played down the impact of US election spending on the company’s finances. She compared it to the soccer World Cup or the Super Bowl and said it was not a “top 10 vertical” for the fourth quarter. – Reuters