Facebook Earnings Beat But Investors Worry About Social Media Engagement

Facebook again beat analysts expectations for its December quarter earnings report Wednesday after the close. However investors and shares were wobbly with concerns over engagement with changes to $FB news feed. 

Social Media Kingpin Facebook $FB reported fourth quarter earnings on Wednesday beating estimates. Investors remain cautious on engaeent following news feed changes, the conference call appeared to ease fears. 

Earnings

Adjusted earnings of $2.21 per share beating consensus estimate of $1.94. That excluded a charge of 77 cents a share as a result of tax reform. Revenue of $12.97 billion, beating consensus estimate of $12.5 billion and up 47% from the year-ago period.

Reaction: Facebook, Inc. Common Stock NASDAQ: $FB

After-hours: 189.35 +2.46 (+1.32%)

 News Feed Concerns

On January 12 this year, Facebook announced upcoming changes to its News Feed section. Investora and analysts expressed concern that Facebook’s strategy shift could be an indication that user satisfaction is slipping, raising uncertainty about the impact on ad revenue, which accounts for about 98% of total sales

Mark Zuckerberg, Facebook’s chief executive, said in prepared remarks with the earnings announcement. “By focusing on meaningful connections, our community and business will be stronger over the long term. In total, we made changes that reduced time spent on Facebook by roughly 50 million hours every day,”  Zuckerberg in a post had said “some measures of engagement may go down.”

The changes to News Feed are geared to promote more meaningful social interactions but do so at the expense of engagement and content from businesses, brands and media. Facebook said changes it made to its News Feed reduced the time spent on the popular web site. Facebook said it recently made changes to show fewer viral videos.

During the the earnings conference call $FB shares bounced from down 4% to up 2% when Chief Financial Officer David Wehner said that improvements in the return on investment by advertisers and ad conversions enabled the lifting of ad rates.

Highlights

  • Ended the quarter with 2.13 billion monthly active users, up 14% from the year-ago period.
  • Number of daily active users also was up 14%, rising to 1.4 billion.
  • Total costs and expenses of $5.6 billion an increase of 32% from the year-ago period.
  • Advertising revenue jumped 48% to $12.78 billion.

Preview of Bite Image

What About Snapchat?

The seeming demise of $SNAP has also helped Facebook’s cause. By last June Facebook’s Instagram Stories feature had grown to 250 million users which has further undermined its chief competitor, Snapchat $SNAP. This was up from 200 million in mid-April. Snap ended Q117 with 166 million users which was up 36% from the year-ago quarter.

Stories was added in August 2016, is a feature inside Instagram. $FB has in this time copied the most popular features of Snapchat. Instagram has over 700 million monthly users, doubling in just two years.

How pervasive are these internet monsters  in our lives?  A report from Research firm Comscore ranking online hits on mobile devices and computers gives us an idea. The growth of Facebook is a cultural phenomenon, last month $FB reached 2 billion monthly active users, doubling its base in just 4 1/2 years. The Q117 earnings number was 1.94 billion monthly active users.

Unique visitors in June via Comscore

  1. Google 241 million
  2. Facebook 204 million
  3. Yahoo! 186 million
  4. Microsoft 183 million 
  5. Amazon 180 million 

Online advertising Industry Revenue Share via emarketer 

Of a forecast $83 billion revenue in 2017 the market share is expected as 40% Google and 21% Facebook.

From Last Year: Facebook $FB Buys tbh Anonymous App To Compete With $SNAP 

 

Leave a Reply

Your email address will not be published.