UPDATED with details of earnings call: Facebook blew past analysts’ projections in its first quarter, even as investors have grown increasingly worried about how the social network’s 2 billion users would react to the Cambridge Analytica privacy breach.
The company reported per-share earnings were $1.69, exceeding analysts’ consensus estimates of $1.35. First-quarter revenue of nearly $12 billion similarly exceeded forecasts of $11.4 billion.
Facebook said the number of daily and monthly active users grew by 13% in March, the month when The New York Times and other outlets reported that the political consulting firm advising the 2016 Trump campaign had obtained personal information about tens of millions of users without their consent.
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Some 2.2 billion people use Facebook every month, and 1.45 billion return every day.
Mobile advertising now accounts for 91% of Facebook’s revenue, up from 85% a year ago.
“Despite facing important challenges, our community and business are off to a strong start in 2018,” said CEO Mark Zuckerberg, in a nod to the privacy controversy that brought him before Congress. “We are taking a broader view of our responsibility and investing to make sure our services are used for good.”
Zuckerberg offered a digested version of his 10 hours of testimony on Capitol Hill, saying Facebook is committed to ensuring that the tools it created to connect people are used for good. He talked about the social network’s investment in safety and security and its efforts to combat foreign interference ahead of the 2018 midterm elections.
Chief Operating Officer Sheryl Sandberg talked about the privacy protections built into Facebook’s ad targeting system. Although the social network uses the information its users provide, together with outside data, to target advertising, it doesn’t sell or divulge personal information to advertisers.
Privacy, and more specifically the new General Data Protection Regulations that go into effect next month in the European Union, dominated much of the discussion with investors. Facebook CFO David Wehner said the new rules, which give users greater control over the use of their data, likely will impact user numbers and ad revenue in Europe — though not significantly.
“Fundamentally, we believe we can build a great ads business while protecting the privacy of people who use Facebook,” said Wehner.
Facebook has committed to providing these same privacy controls to users all over the world.
Wells Fargo Internet analyst Peter Stabler asked how the product experience might change if users dial up their privacy settings.
Sandberg admitted to a certain amount of uncertainty but noted that every company in the digital advertising space would need to play by the same rules. Advertisers will need to decide where they get their best return on investment.
Pressed to offer a “doomsday scenario” around adoption of stricter privacy settings, Wehner said advertisers might not be able to target as effectively, resulting in lower return on investment — and potentially lower bids for ads at auction.
One prominent ad industry analyst predicts brands and marketers that use personal data, such as email, will alter their spending on digital media in Europe, in the wake of GDPR.
“While there are other signals that those marketers can use to target their ads, we think there are still many risks ahead around digital advertising spending in Europe,” wrote Brian Wieser, senior research analyst at Pivotal Research Group. “Further, it remains to be seen whether or not the way in which attempts by Facebook (and everyone who sells digital advertising) to adhere to GDPR will withstand regulatory scrutiny and avoid significant related fines in Europe after May 25 of this year.”
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