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NEW YORK - When Mark Zuckerberg worries, investors should listen. The Facebook founder and chief executive has been flagging for months that ad revenue was set to slow. Now, tweaks designed to make the social network less divisive are hindering engagement and stifling user growth. Facebook has rarely disappointed investors; this could be the year. Zuckerberg’s Harvard dorm-room creation has had a remarkable run since it went public in 2012, its value ballooning to more than $540 billion. Financial results reported on Wednesday show the party continues. Revenue for the fourth quarter of 2017 rose 47 percent to $13 billion, while earnings increased by a healthy 20 percent, even with a tax haircut from Uncle Sam. Facebook has beaten analyst estimates for full-year earnings every year since it went public.
Still, several issues point to a day of reckoning. Zuckerberg’s usual peppy statement that accompanies earnings releases was less so this time around. Changes to Facebook’s news feed feature meant that time spent on Facebook – an important metric to sell advertisers and investors alike – declined by 50 million hours every day.
The tweaks are definitely necessary. The idea is to address Facebook’s role in presenting fake ads that may have swayed the 2016 U.S. presidential election. Moreover, the Silicon Valley firm has inadvertently helped to entrench partisan divides, through the “filter bubble” phenomenon, where users are bombarded with ads and posts that reinforce their existing views.
But the changes are also painful. Zuckerberg recently posted a series of messages on his Facebook promising content that is “good for your well-being and for society.” It sounds like a serving steamed broccoli to a group hungry for chocolate.
Facebook has come down to earth in more ways than one. Three years ago, it traded at roughly 40 times forward-year earnings, twice the multiple of more mature rival Google. Now, the two have converged at around 28 times. Zuckerberg may be helping make Facebook more helpful to society, but the changes that entails may do the opposite for investors.
On Twitter https://twitter.com/jennifersaba
CONTEXT NEWS
- Facebook said on Jan. 31 revenue for the quarter ending December rose 47 percent year-over-year to $13 billion. Earnings increased to $4.3 billion, or $1.44 per share, from $3.6 billion, or $1.21 per share, in the same quarter in 2016.
- Tax cuts in the United States knocked 77 cents off the quarter’s earnings per share figure. Added back in, earnings per share for the quarter were $2.21.
- Chief Executive Mark Zuckerberg said in a statement that because of changes made to Facebook’s news feed feature, time spent on Facebook declined roughly 50 million hours every day.
- Facebook had an average of 1.4 billion daily active users, a 14 percent increase year-over-year.
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(Editing by John Foley and Bob Cervi)
© Reuters News 2018
Still, several issues point to a day of reckoning. Zuckerberg’s usual peppy statement that accompanies earnings releases was less so this time around. Changes to Facebook’s news feed feature meant that time spent on Facebook – an important metric to sell advertisers and investors alike – declined by 50 million hours every day.
The tweaks are definitely necessary. The idea is to address Facebook’s role in presenting fake ads that may have swayed the 2016 U.S. presidential election. Moreover, the Silicon Valley firm has inadvertently helped to entrench partisan divides, through the “filter bubble” phenomenon, where users are bombarded with ads and posts that reinforce their existing views.
But the changes are also painful. Zuckerberg recently posted a series of messages on his Facebook promising content that is “good for your well-being and for society.” It sounds like a serving steamed broccoli to a group hungry for chocolate.
Facebook has come down to earth in more ways than one. Three years ago, it traded at roughly 40 times forward-year earnings, twice the multiple of more mature rival Google. Now, the two have converged at around 28 times. Zuckerberg may be helping make Facebook more helpful to society, but the changes that entails may do the opposite for investors.
On Twitter https://twitter.com/jennifersaba
CONTEXT NEWS
- Facebook said on Jan. 31 revenue for the quarter ending December rose 47 percent year-over-year to $13 billion. Earnings increased to $4.3 billion, or $1.44 per share, from $3.6 billion, or $1.21 per share, in the same quarter in 2016.
- Tax cuts in the United States knocked 77 cents off the quarter’s earnings per share figure. Added back in, earnings per share for the quarter were $2.21.
- Chief Executive Mark Zuckerberg said in a statement that because of changes made to Facebook’s news feed feature, time spent on Facebook declined roughly 50 million hours every day.
- Facebook had an average of 1.4 billion daily active users, a 14 percent increase year-over-year.
- For previous columns by the author, Reuters customers can click on
- SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe
(Editing by John Foley and Bob Cervi)
© Reuters News 2018
