Face­book to change tack as growth slows down

The National - News - - BUSINESS - KELSEY WARNER

Face­book fell short of an­a­lyst rev­enue ex­pec­ta­tions in its third-quar­ter earn­ings re­port, up 33 per cent year-over-year – its slow­est growth in four years.

Net in­come through Septem­ber 30 was $5.1 bil­lion or $1.76 per share.

The the world’s largest so­cial me­dia com­pany, re­ported be­low ex­pected daily ac­tive users, shed­ding a mil­lion ac­counts in Europe and ex­pand­ing in less prof­itable, but also less sat­u­rated mar­kets in Asia as chief ex­ec­u­tive Mark Zucker­berg turns away from the plat­form’s news feed – the cen­tral ad­ver­tis­ing rev­enue gen­er­a­tor for the com­pany for more than a decade– to fo­cus on new growth op­por­tu­ni­ties.

The news feed is out, Mr Zucker­berg told an­a­lysts, and video is in.

On Tues­day, he said the com­pany planned to in­vest sig­nif­i­cantly next year as it fo­cuses on build­ing out prod­ucts such as Face­book Watch and In­sta­gram TV, while ac­knowl­edg­ing it is far be­hind Google’s YouTube in terms of size.

Face­book chief fi­nan­cial of­fi­cer David Wehner said 2019 to­tal ex­penses will grow 40 to 50 per cent com­pared to full-year 2018.

Cap­i­tal ex­pen­di­ture through Septem­ber 30 was $3.3bn, driven by in­vest­ments in data cen­tres, servers, net­work in­fra­struc­ture and of­fices.

Face­book es­ti­mates that more than 2.6 bil­lion peo­ple now use Face­book, What­sApp, In­sta­gram or Mes­sen­ger each month, up 10 per cent from a year ear­lier, but the com­pany’s stock has been bat­tered this year over its role in in­flu­enc­ing US pol­i­tics in the 2016 pres­i­den­tial elec­tion, data se­cu­rity and pri­vacy con­cerns and in­creas­ing reg­u­la­tory re­quire­ments in Europe un­der the EU’s Gen­eral Data Pro­tec­tion Reg­u­la­tion act, which went into ef­fect in May.

At the same time, Face­book chief op­er­at­ing of­fi­cer Sh­eryl Sand­berg said mar­keters were not yet com­fort­able with new video-cen­tric shar­ing fea­tures, a learn­ing curve that will be costly to the com­pany as con­sumer at­ten­tion in­creas­ingly drift away from the news feed to pri­vate mes­sag­ing that re­lies heav­ily on video.

Mr Zucker­berg said: “I want to be up­front that even as­sum­ing that we get to where we want to go … it will take some time and our rev­enue growth may be slower dur­ing that pe­riod.”

The sto­ries for­mat is pop­u­lar on the com­pany’s In­sta­gram and What­sApp, but on its core so­cial net­work it is only just start­ing to gain at­ten­tion.

Still, Mr Zucker­berg be­lieves this is how users will share in­for­ma­tion in the fu­ture and that the po­ten­tial op­por­tu­nity is a far larger one than that can be gained from the news feed.

Tues­day’s re­sults bought Mr Zucker­berg some time to pur­sue the ini­tia­tives, ac­cord­ing to Bloomberg an­a­lysts.

Face­book re­cently dis­closed more mis­in­for­ma­tion cam­paigns by Rus­sia, Iran and do­mes­tic ac­tors that came to light after the com­pany be­gan its own in­ter­nal in­ves­ti­ga­tions and hired thou­sands more em­ploy­ees and out­side con­trac­tors to fer­ret out trolls and fake news.

In March, it emerged that user data was shared through app de­vel­op­ers to UK po­lit­i­cal con­sul­tant Cam­bridge An­a­lyt­ica. Mr Zucker­berg tes­ti­fied be­fore Congress on the is­sue in April and the cam­paign to re­store pub­lic trust has been on­go­ing ever since.

More re­cently, the com­pany dis­closed its big­gest data breach of search and lo­ca­tion check-in his­to­ries of 14 mil­lion peo­ple. Last week, hack­ers gained ac­cess to be able to con­trol about 50 mil­lion ac­counts through the com­pany’s “View As” fea­ture.

The breaches re­in­force pub­lic per­cep­tion that Face­book is col­lect­ing too much per­sonal data and not stor­ing it re­spon­si­bly.

Fol­low­ing its third quar­ter re­sults, Face­book shares rose 3.1 per cent in ex­tended trad­ing, after clos­ing at $146.22 in New York.

Ear­lier this year, the com­pany is­sued a warn­ing that rev­enue growth rates would de­cline in the third and fourth quar­ters, send­ing shares plum­met­ing but man­ag­ing ex­pec­ta­tions for the re­sults.

Bloomberg

Face­book founder Mark Zucker­berg told an­a­lysts on Tues­day that news feeds are out and video is in

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