Controversies Galore Didn’t Impact Facebook’s Revenue in Q1 2019

The company set aside $3 billion for a potential FTC fine

There are now over 500 million daily active users of Stories on Facebook/Messenger, Instagram and WhatsApp bombuscreative/iStock
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Despite what seems to be a new issue every day, Facebook’s revenue-generating engine continues to steamroll down the tracks.

The company released its first-quarter-2019 financial figures Wednesday after market close, and it reported revenue of $15.077 billion, up 26% from $11.966 billion in the first quarter of 2018.

Mobile advertising revenue accounted for approximately 93% of all ad revenue for the quarter, up from 91% in the previous-year period.

Facebook

Facebook’s net income of $2.429 billion was down 51% from $4.988 billion in the year-ago quarter, but there’s a reason for this.

The company factored in a $3 billion legal expense for the quarter, related to the ongoing investigation by the Federal Trade Commission, and chief financial officer David Wehner addressed the move in his opening remarks during the company’s earnings call with investors Wednesday evening.

He said, “Total expenses were $11.8 billion, up 80%. This includes a $3 billion accrual taken in connection with the inquiry of the FTC into our platform and user data practices. This matter remains unresolved, and we estimate that the associated range of loss is between $3 billion and $5 billion. Absent this accrual, our total expense growth rate would have been 46% lower.”

He later added in response to an analyst’s question, “This matter’s not resolved, so the actual amount of payment remains uncertain. However, we’re estimating this range of (loss to be) $3 billion to $5 billion. I can’t really comment further, as this is an ongoing matter. We booked at the low end of the range in accordance with the applicable accounting guidance. So, there’s really not much more to add on that front.”

Facebook

Facebook ended the first quarter with an average of 1.56 billion daily active users, up 8% year-over year. Wehner said the increase was led by growth in India, Indonesia and the Philippines.

Facebook

The company’s 2.38 billion monthly active users as of March 31 also represented an 8% jump from the first quarter of 2018.

Facebook

CEO Mark Zuckerberg said during his opening remarks that over 2.7 billion people are using Facebook, Instagram, WhatsApp or Messenger each month, with more than 2.1 billion using at least one of those services every day.

He added that there are now over 500 million daily active users of Stories on Facebook/Messenger, Instagram and WhatsApp. The feature is called Status on the latter application.

Chief operating officer Sheryl Sandberg said during her opening remarks that 3 million advertisers are now using Stories ads across Instagram, Facebook and Messenger.

She also discussed how Stories are impacting impression growth on the social network’s platform.

In response to an analyst’s question, Sandberg said, “We are seeing more of our impression growth coming from Stories, and when I outlined the factors driving impression growth, I listed Stories first. It was the largest contributor of year-over-year impression growth in the quarter. But those impressions are coming in at lower prices than we see in News Feed. If anything, the mix shift on growth toward Stories is certainly in the near term a headwind on revenue growth.”

She added, “On pricing specifically, we’re seeing such strong impression growth that this supply growth keeps prices low and creates an opportunity for advertisers, and we’re seeing smart advertisers take advantage of that. Ultimately, we believe we can increase demand for Stories as we attract more advertisers and bring more effective direct-response units to Stories. But this … is going to take years, not quarters. At least in the near term, we’re going to see a meaningful discount on prices on Stories.”


david.cohen@adweek.com David Cohen is editor of Adweek's Social Pro Daily.