Facebook profits, revenues, users and advertisers all soar - what's it going to take?

Profile picture for user slauchlan By Stuart Lauchlan January 30, 2019
Summary:
Facebook's clean-up costs are soaring, but so are profits and revenues and user numbers and advertisers. Why change?

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How much is it costing for Facebook to clean up its act? Well, its expenses soared by $10 billion in 2018 according to latest  numbers. But in the unlikely event of anyone feeling sorry for the company here, CEO Mark Zuckerberg is on hand with a dose of self-pity:

The reality is that we've had a number of substantive issues that we needed to address, and the investments we made in safety, security, privacy and well-being both increased our costs and, in some cases, reduced our revenues. We've changed how we build services to focus more on preventing harm. We've invested billions of dollars in security, which has affected our profitability.

Oh dear. :-(

Let’s put that into context. Facebook just turned in fourth quarter profits of $5.2 billion, up 61% year-on-year, on revenues of $12.8 billion, up 30% year-on-year.

For all the scandals and (self-inflicted) problems that have surrounded Facebook over the past couple of years, advertisers are still pouring money into the platform. The firm reckons to have 7 million active advertisers, up from 6 million a year ago, while ad revenues of $56 billion in 2018 represent a 37% growth rate.

And users are still signing on - the number of daily and monthly active users are up 9% year-on-year to top 1.52 billion and 2.32 billion people respectively in the latest quarter. Zuckerberg boasts:

There are now 2.7 billion people using Facebook, Instagram, WhatsApp or Messenger each month and more than 2 billion people who use at least one of our services every day.

As the clean-up effort continues, Facebook is moving from mea culpa mode into a more ‘we’re now the good guys really’ messaging. So Zuckerberg pitches a line that Facebook is good for the economy:

More than 90 million small businesses now use our products, the vast majority of them for free. And of those we surveyed, half tell us that they've been able to grow their businesses and hire more people since joining Facebook. This means they're using our services to create millions of jobs, and this is one of the most important contributions that we feel we can make to the world. And to put this in perspective, the US economy added about 2.6 million jobs last year.

This change of tack goes so far as to highlight “a lot of negativity about the impact of technology” - who’s to blame for that? - and a call to move on:

My approach here is to listen to the critique first, to work on addressing our issues, figure out what we believe are the most important principles to uphold and then go engage in the debate. And I feel like we've come out of 2018 not only making real progress on important issues but having a clear sense of what we believe are the right ways to move forward.

Now, we're still going to make mistakes along the way, but we now have a clearer sense of the path ahead and we're ready to work with people to understand our role and move towards good outcomes, whether that's regulation on content or data, cooperation on shared threats, working openly to make sure AI best serves people, or just standing up for the kind of open and connected world that we all want to see. The Internet is a massive force for change and we're at the center of a lot of the debate that brings, but our core value to people and society remains the same.

This in a week when the latest “mistake” to be revealed involves allegations that Facebook has been paying users as young as 13 up to $20 a month to install a data collection app on iPhones. So it’s understandable that Chief Operating Officer Sheryl Sandberg weighs in with her own stab at applying some bleach to a toxic brand:

We know we still have a lot of hard work ahead of us. We need to continue to do better at anticipating the risks that come from connecting so many people, and we need to earn back people's trust not with words alone but with actions. Part of building trust is helping people better understand our business model. Protecting people's privacy and showing them relevant ads are not at odds. We don't sell your data and we don't tell advertisers who you are. What we do is allow advertisers to reach people interested in their products.

As for the controversy around plans to integrate Facebook, WhatsApp and Instagram, Zuckerberg sets out to get ahead of the fuss around data integration that has ensued:

We're really early in thinking through this. So there's a lot more that we need to figure out before we finalize the plans. And then, of course, this is going to be a long-term project that I think will probably be to whatever extent we end up doing it in - a 2020 thing or beyond.

But he insists that Facebook is approaching its deliberations from the PoV of making the user experience better:

I guess the way that I'm thinking about this is that there's a handful of cases that people are telling us that they want to be able to integrate and communicate more easily across the networks. I think moving more towards end-to-end encryption and improving security there is the right direction to go in. There's a lot of questions there that we need to work through. So we're working through this in a deliberative way. And I wouldn't expect anything here to launch soon, but this is definitely something that we're thinking about and that I think will improve the user experience.

My take

I don’t think they’ve learned a thing from what’s happened, not one thing.

Other perhaps than the need to hire a global Apologist-in-Chief in the shape of Nick Clegg to get out in front and take the bullet where needed. He’s going to have his work cut out I suspect, but as a former politician he's got the flexible integrity credentials - ask a British student! - to be the man for the job.

Then again, when user numbers continue to climb despite everything that’s happened and profits rise, even if the corporate valuation has collapsed, what reason is there to change your ways?