Biz / Tech

Facebook sees ad business to stay profitable despite usage dip

Reuters
Facebook Inc offered reassurances to investors on Wednesday that its digital ad business would remain highly profitable
Reuters

Facebook Inc offered reassurances to investors on Wednesday that its digital ad business would remain highly profitable, despite a dip in usage on the social media network and an overhaul of its flagship News Feed.

The company said in an earnings report that quarterly revenue jumped 47 percent from a year earlier, and executives said on a conference call that they saw more chances to make money even if people spend less time on Facebook.

Analysts had wondered about the resilience of the world’s largest social media network, which is making changes to its products to deter foreign influence campaigns like ones that it says Russia has carried out and to stem the spread of sensationalism.

Facebook added to jitters after the bell on Wednesday when, in its earnings report, it said that at the end of last year time spent by users had fallen by about 50 million hours a day. 

Shortly afterward, though, Facebook executives expressed optimism on the call with analysts, saying the changes they were making in response to criticism would be healthy for the business in the long term and might not even hurt much in the short term.

“I want to be clear: The most important driver of our business has never been time spent by itself. It’s the quality of the conversations and connections,” Chief Executive Mark Zuckerberg said on the call.

Facebook management “acknowledged things that maybe most investors weren’t thinking about before — the reduction of users and usage — but at the same time they pointed to a lot of positive trends on their other platforms,” Pivotal Research Group analyst Brian Wieser said.

Although Facebook usage is down, he said, “One shouldn’t be reflectively negative on this.”

Chief Operating Officer Sheryl Sandberg told analysts that recent changes to reduce disinformation on Facebook could create “more monetization opportunities.”

Sandberg said she was optimistic about potential revenue from ads on “stories” on Facebook and Instagram, while Chief Financial Officer David Wehner said the average price per ad increased 43 percent in quarter.

“They said average revenue per ad was up a lot, that quality of ads has improved, and that the engagement declines were not meaningful,” Wedbush analyst Michael Pachter said.

“In other words, better quality engagement and better ability to target ads. The street probably likes that,” he said.

Facebook said that time spent was falling at the end of last year by about 50 million hours a day due to changes that it said reduced viral videos, even before the company announced a series of changes to the News Feed that may further reduce user engagement.

Facebook’s 1.4 billion daily active users was up 14 percent from a year earlier, but below analysts’ estimate of 1.41 billion for the fourth quarter, according to financial data and analytics firm FactSet.

The number of daily users in the US and Canada fell for the first time in Facebook’s history.


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