Investors liking it as Facebook profit jumps, user base nears 2B

san francisco — Facebook reported that its quarterly profit surged as its ranks of monthly users closed in on two billion, but warned of rising expenses and slowing revenue growth.

The leading social network said it made a profit of $3.06 billion on $8.03 billion in revenue in the first three months of this year, posting increases of 76 per cent and 49 per cent, respectively, compared to the same period last year.

Meanwhile, the number of people using Facebook monthly increased 17 per cent to 1.94 billion, according to the earnings report.

“We had a good start to 2017,” co-founder and CEO Mark Zuckerberg said in the release. “We’re continuing to build tools to support a strong global community.”

Facebook bested high expectations for revenue but fell short on profit. Shares fell 2.4 per cent to $148.17 in after-market trades that followed release of the earnings figures.

The California-based company’s shares had ended the trading day down less than a percent ahead of the earnings release and as it put out word of plans to hire an extra 3,000 staff to remove violent content such as the gruesome killings and suicides broadcast on its video platform.

“They are working their butts off to fix it, but it is not an easy problem,” Analyst Rob Enderle of Enderle Group said. “They really need to get that artificial intelligence up and running, they couldn’t hire enough people to do real-time video review of everything.”

Facebook efforts to better filter content come amid growing criticism over use of the platform for promoting violence and hateful activity. Increased hiring also promises to push up operating costs and eat into profit at the social media giant.

Enderle said he believes Facebook was intentionally downplaying expectations to avoid its shares taking big hits due to surprise disappointments later in the year.

“It’s likely Facebook is being very conservative,” he said. “They don’t want to tank next quarter.”

Facebook still expects revenue growth to throttle back “significantly” this year as the social network

AI will get better over time, but it will take years to get to the level we want Mark Zuckerberg, CEO of Facebook

runs out of room to post ads, chief financial officer David Wehner said during an earnings call with analysts.

Meanwhile, expenses are expected to surge 40 per cent to 50 per cent compared with last year as Facebook invests in data centres, research and more, he said. “We continue to invest aggressively to improve our business and drive value for our community.”

Facebook investments include artificial intelligence, which promises to be an effective tool for prioritising content, helping smartphone applications “recognise” what cameras are pointed at, and even identify violent video content being streamed live.

“AI will get better over time, but it will take years to get to the level we want,” Zuckerberg said.

Facebook also expected to spend more money on content to make available on a recently added video tab, planning to switch to a revenue-sharing model after building up its audience.

The world’s biggest social network and a powerhouse in online advertising, Facebook has been working to diversify its revenue base as it expands into new areas.

But advertising still accounted for the vast majority of revenues, $7.86 billion, with most of that money made from people connecting to the social network on smartphones or tablets. Facebook’s family includes the fast-growing social network Instagram and messaging applications WhatsApp and Messenger, and Oculus, which makes virtual reality gear. —