Despite the bad news stories, Facebook continued to grow in 2018

For anyone who thought the business of Facebook would be hurt by the unrelenting stream of negative stories last year, the social network delivered a “think again” Wednesday with its Q4 and full year financial results.

Advertising revenue hit US$55 billion (all figures in U.S. dollars) in 2018, up 38% from $39.9 billion in 2017. Daily active users rose by 9% year over year, reaching 1.52 billion globally and 186 million in Canada and the U.S. (up from 185 million in Q3).

“We’ve fundamentally changed how we run our company to focus on the biggest social issues, and we’re investing more to build new and inspiring ways for people to connect,” said CEO Mark Zuckerberg, announcing the results.

The first part of that statement was about the negative stories—the second part likely means a greater focus on Stories. Zuckerberg made it clear in October that this was where the business was heading, as users embraced the ephemeral stories format pioneered by Snapchat, and later adopted by Instagram and then Facebook.

“All of the Stories trends suggest that in the not too distant future people will be sharing more into Stories than they will into feeds,” said Zuckerberg at the time.

But according to Reuters, the Stories format is being used by just 2 million of Facebook’s 7 million active advertisers and Facebook plans to make it easier for marketers to advertise in Stories.

Citing Morgan Stanley analysts, Reuters reported that “Facebook has intentionally kept ad unit pricing for Stories 20% to 50% lower than News Feed as it works to improve performance and could bring a double-barrelled benefit to ad revenue growth if it can improve ad efficacy.”

Regardless of what lies ahead, analysts were impressed with the Facebook performance.

“People were fearing the worst. The fact that the company is as stable as it is now takes away the bear-case worries about a real collapse in revenue growth,” Michael Nathanson, partner and analyst at MoffettNathanson, told the WSJ.

“Between the intellectual tech press and the Washington elite, there’s a huge disconnect between the news and what the rest of the world is doing,” Richard Greenfield, an analyst at BTIG LLC in New York, told Bloomberg. “Advertisers don’t listen to either of those groups — they listen to consumers. Most of Facebook’s advertisers have no other place to go with a return on investment this good.”

A rare cautious take was offered by Wired’s James Temperton who noted that growth in Canada, the U.S. and Europe has slowed.

Users are starting to tire of having their data bought and sold without any control, particularly when more privacy friendly and encrypted sharing options are out there, he said.

“Facebook the social network, despite all the scandal, remains hugely successful. But slowly but surely, habits are changing,” said Temperton. “Why put your life online to [be] chopped up and monetized when you can send an end-to-end encrypted message to the only people you really want to share it with?”

– David Brown


Chris Powell