- Facebook reaches 2.5 billion monthly users mark but slow growth results in a decline of the share price as compared to the last year.
Facebook surpassed expectations from Wall Street in Q4 but declining profit growth pushed the share price up. Facebook has hit 2.5 billion monthly users, up 2% from 2.45 billion in Q3 2019 when it grew 1.65%, and now has 1.66 billion daily active users, up 2.4% from 1.62 billion last quarter when it grew 2%. Facebook generated revenue of $21.08 billion, up 25 percent year-over-year, with earnings of $2.56 per share.
Yet net income was only $7.3 billion, up only 7 percent year-over-year from a 61 percent increase over 2018. In the meantime, operating margins fell from 45 percent in 2018 to 34 percent in 2019. Expenditures for Q4 2019 increased to $12.2 billion, up a whopping 34 percent from Q4 2018. Facebook’s spending of $46 billion for the year is up 51 percent versus 2018. One big source of that expenditure? Headcount rose to 44,942 by 26 percent year-over-year and Facebook now has over 1000 privacy engineers working.
Although Facebook’s user base continues to grow very slowly, with as much productivity it has difficulty squeezing out more and more cash from them.
Facebook’s Q4 2019 earnings are meeting forecasts against Zack’s consensus projections of revenue of $20.87 billion and earnings of $2.51 per share. Facebook shares were down more than 7 percent in after-hours trading following the announcement of earnings after closing 2.5 percent today at a high of $223.23. Today, before this month, Facebook remains close to its previous share price peak.
Facebook CEO Mark Zuckerberg had previously warned that it would be expensive to address hate speech, election interference and other issues of content moderation and safety. Still, expenses have risen, and profits have fallen faster than Wall Street seems to expect. Facebook has to hope for its commitment to using scalable AI to manage more of these jobs
But some might see today as Facebook’s proper reckoning — penance to neglect protection for years in favor of growth. David Wehner, CFO of Facebook, confirms that he has also agreed to pay $550 million in a settlement for his breach of the Illinois Biometric Information Privacy Act. The class-action suit comes from Facebook collecting facial recognition data from users to power its Tag Suggestions feature which recommends tagging friends in the photos you appear in. The record-breaking settlement still falls well short of the $35 billion that Facebook could have received in potential penalties.
Facebook executives are optimistic about its valuation despite the share price being at a high, as today Facebook revealed plans to increase its share buyback program by $10 billion, adding up to its previous authorization to buyback worth up to $24 billion.
Facebook succeeded in reaching 1 million daily users in the U.S. & Canada area where it makes the most revenue since returning to growth there last quarter after a year of slow growth or not. In the face of pressure from apps like TikTok and a resurgent Snapchat, Facebook’s stickiness, or daily to monthly active user ratio stayed 66 percent.
Facebook states that there are now 2.26 billion users every day opening up either Facebook, Messenger, Instagram or WhatsApp, up from last quarter’s 2.2 billion. The app family sees total monthly users of 2.89 billion, up 9 percent year-over-year.
With this update on earnings, Facebook released a new status: Family Average Revenue Per Person. That’s the total revenue of the product, divided by total users on Facebook, Snapchat, Instagram, and WhatsApp. The firm is seeking to use that ad revenue from Instagram to make the rest of the company look stronger. This could help mask changes in the own revenue of the Facebook app as teens look for feeds of more youthful content.
Wehner announced that, in late 2020, the company would stop sharing Facebook-only stats in favor of the Family Of Apps stats.
Zuckerberg emphasized the need for Facebook to stay focused on addressing social issues during the earnings call and the implications of the company’s growth. He said Facebook will keep making its apps more secure and private.
As for the product updates, Zuckerberg took advantage of commercial opportunities. Facebook builds WhatsApp Pay, and claims “I’m expecting this to start rolling out in several countries and for us to make a lot of progress here in the next six months.” On Christmas Day, people bought nearly $5 million in content from the Oculus Store which Zuckerberg called a milestone. He says developers are using Facebook’s Spark AR technology the most of its kind, with hundreds of millions of people using face filters created with it.
About plans to integrate chat interfaces within the company, Zuckerberg says that Facebook, Instagram, and WhatsApp will maintain their brands. He also noted that they’re already completely integrated on the backend.
Recently, Facebook launched off-facebook activity in order to protect the privacy of users and keep a track of third party apps.