By Deepa Seetharaman
Facebook Inc., in its first earnings report after touching off
widespread data-privacy concerns, posted soaring revenue and profit
that highlighted the company's central place in the digital
economy.
The social-media giant has weathered one crisis after another in
the 17 months since the 2016 presidential election but its business
-- at least for now -- is still thriving.
Facebook reported quarterly per share profit of $1.69, up from
$1.04 a year earlier, while revenue rose nearly 50% to $11.97
billion. Net income rose 63% to nearly $5 billion, compared with
$3.06 billion a year ago.
Those results topped analyst expectations.
Executives acknowledged that Facebook must better police its
platform, but insisted they could do so without overhauling its
lucrative advertising business, dismantling tools for targeting
consumers, or offering a paid version of the service.
"We are taking a broader view of our responsibility and
investing to make sure our tools are used for good," Chief
Executive Mark Zuckerberg said during a call with analysts. "And we
also need to keep moving forward, building new tools to help people
connect, build community and bring the world closer together."
Facebook added about 70 million monthly users during the first
three months of the year bringing its overall user base to 2.2
billion, up from 2.13 billion at the end of 2017.
The Menlo Park, Calif., firm also said it would buy back an
additional $9 billion in shares, adding to the $6 billion
previously authorized.
In after-hours trading Wednesday, Facebook shares rose about 7%
to $170.80. Before the earnings release, the company's shares had
fallen more than 18% from a record high in early February.
Facebook's earnings report marks the first snapshot of how the
company's ties to political-data firm Cambridge Analytica are
affecting the Silicon Valley giant's business.
Cambridge Analytica aided the Trump campaign in 2016 and
allegedly bought data about tens of millions of Facebook users from
an outside developer. The incident, disclosed in mid-March,
highlighted Facebook's at times lax oversight of how outside
developers handled user data they extracted from the platform.
It also sparked anger toward the site and a #deletefacebook
campaign. Cambridge Analytica has denied wrongdoing.
Much of the fallout happened after the quarter ended in March
and isn't fully reflected in Wednesday's report. But Facebook Chief
Operating Officer Sheryl Sandberg said the company hadn't seen a
"meaningful trend" of advertisers fleeing the platform amid the
criticism of its privacy practices.
Major advertisers "were very aware of the controversies swirling
and wanted to know more about what other brands were doing," said
Andy Taylor, associate director of research at data marketing firm
Merkle. "But really, in terms of making moves, advertisers are more
in a wait-and-see mode."
Mr. Taylor added that most advertisers generally remain happy
with Facebook's products. He noted that its struggles haven't yet
provoked the same kind of outrage toward advertisers as last year's
controversy surrounding Alphabet Inc.'s YouTube and its placement
of ads adjacent to videos with objectionable content.
The uproar over Cambridge Analytica is the latest episode to
spur questions over Facebook's reach. The period since the 2016
presidential election has been tumultuous, with users, advertisers
and lawmakers questioning whether the company sacrificed security
and privacy in pursuit of relentless growth.
On Wednesday, executives uniformly defended the Facebook's
business model, saying it was possible to deliver targeted
advertising without violating users' privacy. Facebook allows users
to turn off some targeted ads, but not all.
"Advertising and protecting people's information are not at
odds," Ms. Sandberg said. "We do both."
Mr. Zuckerberg appeared twice in front of U.S. lawmakers this
month in hearings centered on the Cambridge Analytica episode, and
Facebook has redoubled efforts to stamp out abuse.
Still, most analysts and investors believe additional regulation
is inevitable, although it isn't clear what form it will take or
what impact it would have on Facebook's bottom line.
Mr. Zuckerberg told lawmakers that he was open to some forms of
regulation but added that too many rules could impede American tech
companies from competing head-to-head with Chinese rivals.
In one indication of how tougher oversight could limit growth,
Facebook Chief Financial Officer David Wehner said Wednesday that
average monthly and daily user growth in Europe could be flat or
down as a result of new privacy regulations scheduled to go into
effect in May.
Earlier this week, Google's parent company, Alphabet --
Facebook's biggest rival in the online-ad space -- reported a
profit for the first three months of the year that topped
expectations, but investors grappling with the company's higher
expenses sent the shares down 4.8%, the stock's worst session in
more than two months.
However, Alphabet executives played down the expected impact of
the European rules, saying its search ads rely less on the type of
personal targeting that will be limited by the regulation.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com
(END) Dow Jones Newswires
April 25, 2018 19:47 ET (23:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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