Facebook is untouchable

Image: Reuters/Dado Ruvic/Illustration
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Facebook admitted in its fourth quarter earnings report Jan. 31 that users spent tens of millions of hours less with the social network each day. But that didn’t stop the social media giant from posting yet another record-breaking quarter.

The company reported 48% growth in revenue over the previous year’s fourth quarter, generating $12.9 billion. Profit rose 20% to $4.27 billion from $3.57 billion. Facebook may have significantly beat analysts’ revenue estimates, but the company’s user growth slowed more than expected. Facebook signaled that the steps it’s taking to revamp the News Feed are reducing the time people spend on the platform.

While the results suggest that Facebook’s business is as robust as ever, its stock price initially plummeted after the report. Facebook’s daily user count, which analysts consider a crucial metric for the company’s long-term health, fell short of expectations, totaling 1.4 billion, compared to estimates of 1.41 billion. But when Facebook began discussing its plan for the future of content on its site, Wall Street’s view began to change.

“2017 was a strong year for Facebook, but it was also a hard one,” founder and CEO Mark Zuckerberg said in a release, glossing over myriad controversies the company has dealt with around fake news, metrics mistakes, and foreign entities meddling in elections during the year. “In 2018, we’re focused on making sure Facebook isn’t just fun to use, but also good for people’s well-being and for society.”

Earlier this month, Facebook announced that it would be prioritizing posts from friends and family over content from brands and publishers, and that it expected user engagement to fall. Analysts tend to agree that while the move might cost the company in the short term, it’s a good move looking forward.

Zuckerberg said that, in the last quarter, the company’s changes reduced time spent on Facebook by a whopping 50 million hours each day, in part by showing people fewer viral videos. “Helping people connect is more important than maximizing the time people spend on Facebook,” he said on the earnings call.

Facebook also added that the price of its ads has been increasing recently, meaning any loss in revenue from users spending less time on the site and seeing fewer ads should be offset by the more expensive ads.

After initially dropping as much as 4.5% in after-hours trading, Facebook’s stock price jolted back up when executives explained that the changes to the News Feed will likely not have any long-term effects on the company’s guidance for 2018. Its stock was trading up 2.5% from its close at the time of publication.

“News and video will always be an important part of Facebook,” Zuckerberg added on the call.

But there are still rocky roads ahead: Facebook is struggling to find new users as easily as it used to. The social network’s monthly active users rose from 2.07 billion to 2.13 billion quarter-over-quarter—well over half the population of the world’s internet users—but its user growth has slowed on an annual basis. Facebook’s growth on its main site was 14.5% from a year earlier, compared with 16.9% in the same period last year.

The US continues to be Facebook’s main source of revenue, with the gap between Facebook’s home market and others growing. However, daily active users fell in this money-making market.