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Facebook Sees Spending up in 2017 as it Eases Past Wall Street Estimates


02/02/2017


Facebook Sees Spending up in 2017 as it Eases Past Wall Street Estimates
Demonstrating that controversy over so-called "fake news" and inaccurate advertising measurements had little impact on its financial performance, Facebook Inc cruised past Wall Street's earnings and revenue expectations with strong growth in its mobile ad business.
 
The company showed no signs of slowdown in growth with quarterly profit of $3.57 billion, more than double the $1.56 billion it reported a year ago. Shares ticked up about 0.2 percent in after-hours trading and the results handily beat analysts' expectations.
 
Due to limits on ad load - the total number of ads Facebook can show to each user, ad growth would likely slow "meaningfully", the company had warned in November. But as total revenue soared to $8.81 billion from $5.84 billion a year ago there was little sign of that in the fourth quarter.
 
"I think the rate of growth will decline, but it will remain very high," said analyst Michael Pachter of Wedbush Securities. "They grew 57 percent in 2016, and our current model has 'only' 38 percent revenue growth in 2017. That's still pretty impressive."
 
Facebook now accounts for 84 percent of ad revenue, up from 80 percent a year ago and the company's core business continued to power ahead as mobile advertising accelerated.
 
As the company invests in video and other priorities, the company expects a major ramp-up in hiring and other spending during 2017, said Chief Executive Mark Zuckerberg to analysts on a call.
 
Especially professionally created "episodic content" produced week-to-week, the focus would be on generating short-form, Zuckerberg said.
 
He said that users should come to Facebook "when they want to keep up-to-date on what's going on with their favorite show or what's going on with a public figure."
 
When he broadcast his announcement of U.S. Supreme Court nominee Neil Gorsuch on Facebook Live, U.S. President Donald Trump used the service for that on Tuesday.
 
In addition to next-generation television companies like Netflix Inc, YouTube, owned by Alphabet Inc's Google would also be threatened by the video push.
 
The expected Snap Inc initial public offering could also be shadowed by Facebook's strong performance. Along with with WhatsApp and Instagram, Facebook competes with Snap chiefly through its Messenger service.
 
To retain those already on the network and attract more users, the various Facebook apps have all been adding features rapidly. Some of those features are clearly aimed at Snap.
 
Fake news and partisan propaganda on the network emerged as a major issue in last year's U.S. presidential election and Facebook has also been building new tools to stem its spread.
 
The impact of U.S. election spending on the company's finances was played down by Chief Operating Officer Sheryl Sandberg. It was not a "top 10 vertical" for the fourth quarter, she said comparing it to the soccer World Cup or the Super Bowl.
 
"No one event is that big for our business," she said.
 
Saying that about 1.86 billion people were using its service monthly as of Dec. 31, up 17 percent from a year earlier, the company inched closer to reaching 2 billion users.
 
As Zuckerberg all but ruled out an imminent expansion in the world's most populous country, China apparently will not contribute to that growth any time soon.
 
"We're only going to do this in a way that we're comfortable with in the long term," he told analysts, adding that there would be "no news at all in the near term."
 
 (Source:www.reuters.com)


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