Facebook reports a blowout first quarter, seems impervious to data and privacy problems
Facebook, which has been under intense scrutiny for privacy and data issues, had a blowout fourth quarter, easing, for now, concerns that the onslaught of negative media from stories about sharing user information with third parties and data breaches could harm its business.
The company's ad revenue rose 38 percent year over year to a record $16.64 billion in the quarter, with a record $6.8 billion in profits. User growth proved resilient, too, ending the quarter with 1.52 billion daily users on the main app, and an increase of 9 percent year over year, and more than 2 billion people use one of its services daily, which was the same general number Facebook provided in the third quarter.
Facebook Stories, which is starting to take hold beyond Instagram, looks increasingly like a bright spot for the network.
The mobile videos that disappear in 24 hours, Stories—which Facebook copied from Snapchat two years ago—has been increasingly central to Facebook's strategy. It was developed to unify the social network's family of apps—Facebook, Messenger, WhatsApp and Instagram—with the goal of creating stronger ties between all the properties. For instance, Stories present the first Facebook ad format that's the same across all the apps, and CEO Mark Zuckerberg has called Stories "the future of sharing."
Zuckerberg said on Wednesday, in a call with Wall Street analysts following the release of earnings, that Stories are starting to pick up on the main Facebook app, and not just on Instagram, where they were popular out the gate when they launched two years ago.
"Stories on Facebook is growing quickly," Zuckerberg said. "We're going to get where we need to get there."
Facebook, says Zuckerberg, needs to get ad prices higher on Stories, because while they're drawing more demand from advertisers, they still cost less than ads in the News Feed, where demand is stronger. Facebook has been warning investors that as Stories becomes more prevalent, the rate of revenue growth will likely decelerate in the short term.
When Facebook first offered Stories in 2017 there were questions around whether they would be as popular on the main social network as they had been on Instagram. Zuckerberg said he harbored similar misgivings.
"Some of the execution wasn't as good as it needed to be," Zuckerberg said during the call, referring to the initial Stories push on Facebook proper.
Now, advertisers say they are seeing the popularity and adoption rise on Facebook.
"When Facebook launched Stories it seemed like not a single person used them, and now adoption rates are through the roof," says Meghan Myszkowski, VP of social activation at Essence North America. "Facebook has not released figures yet, but they said candidly that Stories are growing at a significant clip, out of nowhere."
Facebook COO Sheryl Sandberg said that Instagram Stories attract 500 million viewers every day, but did not say how many there are on Facebook. Last year, the company said there were 300 million people viewing Stories daily on Facebook and Messenger combined, and 450 million people on WhastApp.
There are signs that the price difference is narrowing between more expensive News Feed ads and Stories, according to Aaron Goldman, CMO of 4C Insights, a marketing technology and data firm that can track spending on Facebook through more than 1,000 advertisers on its platform.
"Pricing is pretty similar for Stories and News Feed across Facebook and Instagram," Goldman says. "And adoption is growing."
On Facebook proper, advertisers are doubling their spending on Stories every month through 4C, and Stories account for 22 percent of ad spending on Instagram, according to Goldman.
Advertisers were watching Facebook's quarterly earnings for signs of how well Stories ads are performing and how the marketplace for them will evolve.
"If Facebook starts having to insert more ads in Stories, that could degrade the experience for users," says Noah Mallin, head of content and experience at Wavemaker, a WPP agency. "They have to find that line between growing revenue and not overwhelming people with ads."