Facebook’s Q1 Earnings Call Reports Strong Numbers, High Hopes Despite Data Privacy Backlash

Facebook’s data privacy scandal has dominated the news these past few months. Today, the company is reporting something it’s likely more excited about.

On today’s Q1 earnings call, the Silicon Valley giant reported strong numbers for Q1 2018, with a total revenue of $11.97 billion and 1.45 billion daily active users. Both numbers outpaced estimates from Wall Street and Facebook’s slower growth in Q4 2017.

Positive Numbers Despite Negative Press

Such a positive earnings report might come as a bit of a surprise at first, on the heels of the revelation that 87 million Facebook users had their data misused by data analytics firm Cambridge Analytica — and Facebook CEO Mark Zuckerberg’s subsequent hearing before Congress earlier this month.

But these events, while significant, came late into the opening quarter of 2018, and likely had little influence on the Q1 data Facebook is seeing today.

Nonetheless, Facebook’s executive team didn’t hesitate to tackle the subject of data privacy during the live Q1 earnings call this afternoon.

“We have a responsibility to keep our community safe and secure,” Zuckerberg said at the start of the earnings report, reiterating his opening remarks to Congress during his hearing. Facebook’s Chief Operating Officer Sheryl Sandberg expanded on this sentiment later into the call, saying people should be able to control their advertising experience while using Facebook.

“At the same time,” Zuckerberg continued, “we also have a responsibility to keep moving forward.” To that end, the term that came up repeatedly during the call was “meaningful interactions.”

“This quarter, we’ve shifted from passive consumption to meaningful interaction,” Zuckerberg said.

The executive preceded Facebook CFO David Wehner’s financial report with data related to the new tools and trends the company believes will drive the future use of the Facebook platform.

While 200 million users belong to “meaningful” Facebook groups that connect users through common interests, said Zuckerberg, he expects to double the number of group users in the near future. Although 100 billion messages are sent every day between WhatsApp and Facebook Messenger, 3 billion are now using WhatsApp Business to communicate and collaborate with colleagues.

Financial Gains Abroad and in Mobile

Following the optimism of Facebook’s CEO, the CFO touched on numerous increases across the company.

Contained within the nearly $12 billion in total Q1 revenue, Wehner said, Facebook saw a $536-million increase in earnings outside of the U.S., from what he described as “international tailwinds.”

These global gains are likely to pique the interest of European advertisers who are concerned about what the upcoming General Data Protection Regulation (GDPR) could mean for the value of advertising on the Facebook platform. (More on the GDPR in just a minute.)

Wehner also reported that net income translated to $169 per share, and that the company hired 48% more people in Q1 2018 than it did in Q4 2017.

Another particularly intriguing figure is Facebook’s mobile ad revenue, which increased 16% from last year to $10.7 billion. Together with the company’s 1.45 billion users, whether or not this data indicates a promising year ahead or a high height to fall from in Q2 remains to be seen.

Questions Around the GDPR

Facebook’s executive team took a variety of questions following their earnings report, one being if the company has seen a change in user behavior or time spent on the site.

Wehner had no specific updates to how long users spend on Facebook, adding that “we’re not optimizing Facebook based on time spent” on the platform. However, he echoed Zuckerberg’s opening remark that they are observing more meaningful interactions taking place across Facebook’s tools — specifically, an increase in “certain types of sharing” and “declines in the more passive viewing of video content.”

The topic that dominated listeners’ questions, though, was the GDPR — which takes effect across Europe on May 25. Multiple people from major companies joined the Q1 earnings call to ask if the GDPR has or will change advertisers’ view of (or, perhaps, loyalty to) Facebook.

Facebook’s executives made it clear on today’s call that the company has begun rolling out GDPR’s controls to their European market. But, according to Wehner, it’s too early into the rollout to predict how advertisers will react — nor is the reaction of any one marketer the most legitimate measure of Facebook’s value as an ad-serving product.

“GDPR affects the entire online advertising industry,” Wehner said, explaining that relative performance of Facebook ads is much more important than the ad revenue of any one Facebook Business Page.

What Facebook can foresee, as stated by Zuckerberg and Sandberg, is the way in which marketers will refocus their efforts while staying on the Facebook platform.

“Messaging can be a more transactional medium than feeds [of Facebook Business Pages],” Zuckerberg said, suggesting that chatbots and similar emerging tech will allow advertisers to provide ongoing customer service through tools like Facebook Messenger and WhatsApp.

Reflecting on the quarter, Facebook is seeing some “nice experimentation” with the things that make advertisers more effective, according to Sandberg. Q1 produced impressive statistics, but Facebook’s Q2 earnings in July will show how resilient the company really is to the unsavory media attention it incurred earlier this year.

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    Updated on 22 October 2018

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