Facebook: Despite Usage Drop Ad Sales Will Rise

Facebook Inc. offered investors reassurance on Wednesday that its ad business would remain very profitable despite the social media giants seeing a drop in usage and a complete overhaul of its News Feed.

In its earnings report, the company announced that revenue for its recently ended quarter had increased 47% in comparison to the prior year, and company executives said they saw more opportunities to make money even if users spent less time on the social media site.

Analysts wondered about how resilient the largest social media network in the world would be, which has made changes to products it has to deter influence campaigns from foreign entities like the one it says Russia carried out.

On Wednesday, Facebook gave investors even more jitters to deal with after the closing bell when it said in the quarterly earnings report that at the end of 2017 time spent on the site by users had dropped by approximately 50 million hours per day. Shares of Facebook fell over 4% in trading afterhours.

Although, shortly after, executives at Facebook expressed their optimism with analysts, saying changes being made in response to much criticism were healthy for the company for the long term and may not hurt that much over the short term.

CEO Mark Zuckerberg said he wanted to be clear when saying that the most important driver of the business has not ever been time spent on the site by itself.

The upbeat executive forecast led to shares rebounding overnight and by the early morning hours of Thursday were up 1.4%

One analyst on Wall Street summed it up by saying management at Facebook had acknowledged things that most investors were already thinking about such as the reduction of usage and users, but they also pointed to several positive trends on other platforms.

COO Sheryl Sandberg said to analysts that the recent charges to lower disinformation on the platform could create more opportunities for monetization.

Sandberg told analysts she was optimistic about the potential revenue generated from ads on “stories” that appear on Instagram and Facebook, while CFO David Wehner announced that the average price for each ad increased by 43% during the quarter.

The daily active user count of 1.40 billion was an increase of 14% compared to the same period one year ago, but below the estimate of analysts of 1.41 billion.

Nevertheless, total revenue was not impacted as it rose 47% to end the quarter at $12.97 billion, which beat expectations of $12.55 billion.

Leave a Reply