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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Jennifer Saba
NEW YORK, May 3 (Reuters Breakingviews) - Facebook’s idea of slowdown is more like a steady clip. The social network reported a striking 51 percent jump in advertising revenue, to $7.9 billion, in the first quarter. Instagram’s success with users is helping the team effort. Boss Mark Zuckerberg is adding 3,000 staff to police content after a spate of violent videos. He may need more to contain reputational risk.
For months Facebook executives have warned that ad spending would see a “meaningful” slowdown this year. That has yet to materialize. The year-over-year growth rate in the first three months of the year was down just 2 percentage points from the preceding quarter.
Instagram, with a visual canvas that’s attractive to brands, is probably part of the reason for the bump. The photo-sharing network has seen daily active users surge by 100 million over the past six months to 700 million. Facebook doesn’t break out Instagram’s advertising revenue though Chief Operating Officer Sheryl Sandberg said Wednesday that the product is one of the most important mobile-ad platforms for the $440 billion firm, alongside the flagship.
Executives renewed their warning of an ad slowdown, though. A pullback is likely as the company reduces the amount of advertising inventory in its network.
Other concerns may eventually weigh on growth, including how Facebook handles violent content. Last month, it took the social network several hours to take down two videos, one chronicling a killing in Cleveland, Ohio, and another a murder-suicide in Thailand.
Zuckerberg plans to almost double the number of staff keeping an eye out for questionable content, to 7,500. It’s unlikely to be the last such move. Members watched 100 million hours of video a day in early 2016, the last time Facebook disclosed that metric. That number has since grown since it launched live video later in that year.
For now, Facebook’s road looks wide open as it pursues Zuckerberg’s goal of building its community of nearly 2 billion users. The company even embraced the idea that stock-option compensation should fully be counted toward its costs, and stopped reporting adjusted numbers. Yellow flags can’t dent the speed.
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CONTEXT NEWS
- Facebook reported on May 3 revenue for the first quarter rose 49 percent from the same period a year earlier, to $8 billion. Advertising revenue increased 51 percent. In the fourth quarter, ad revenue was up 53 percent year-on-year.
- Net income for the quarter increased 76 percent from a year earlier, to $3.1 billion. At $1.04 a share, earnings fell short of the analysts’ consensus expectation of $1.12.
- Daily active users for the period ending March 2017 were 1.28 billion, an increase of 18 percent year-over-year. Monthly active users were 1.94 billion, a rise of 17 percent.
- Earlier on May 3, Chief Executive Mark Zuckerberg said Facebook plans to add 3,000 people over the next year to review content on the network. Currently Facebook has 4,500 people reviewing its content.
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(Editing by Tom Buerkle and Martin Langfield)
© Reuters News 2017
