And now, good news for Facebook: after seeing its reputation tarnished and stock value hurt by the Cambridge Analytica fiasco, Facebook roared back with an earnings announcement that beat analysts’ expectations.
On April 25, the company announced that its revenues grew 49 percent year-over-year to $11.9 billion, with a $1.69 earnings per share that easily beat the predicted $1.35. Facebook also saw an increase in monthly active users, giving the world’s largest social network 2.196 billion worldwide. Mobile accounted for 91 percent of its ad revenue, which is astounding considering how slow Facebook was to embrace mobile advertising after going public in 2012.
Usually CEOs discuss meaningful investments and developments in their products and services during quarterly calls. But Facebook is not experiencing business as usual. The company has wrestled with ongoing concerns about its ability to protect the personal data of its users as well as Mark Zuckerberg’s ability to lead. In a clear reference to events of recent weeks, Zuckerberg said, “Despite facing important challenges, our community and business are off to a strong start in 2018. We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together.”
In the aftermath of its earnings announcement, Facebook faces a multitude of questions, among them:
- Will advertisers stay loyal? L’affaire Cambridge Analytica occurred after the first quarter ended; so, its impact would not have been felt when Facebook reported quarterly earnings. Chief Operating Officer Sheryl Sandberg said that Facebook hadn’t seen a “meaningful trend” of advertisers bailing. Time will tell.
- How will the European Union’s General Data Protection Regulation Compliance (GDPR) affect Facebook’s advertising-driven future? GDPR, which takes effect May 25, requires both EU-based businesses and businesses operating in the EU to conform to more rigid privacy requirements or face stiff fines. In the run-up to May 25, Facebook has warned that GDPR could hurt the growth of its EU-based users but that otherwise its business will not be affected. How GDPR affects Facebook and its competitors remains to be seen. We won’t really know the impact until Facebook announces quarterly earnings down the road.
- What’s next from a product standpoint? Facebook has been placing large bets on virtual reality. Those investments will continue, as we’ll probably see at Facebook’s F8 Developer Conference May 1 and 2. Expect Facebook to ramp up its spending on projects that improve society, such as making the internet more accessible to Africa. The company has sought to do good for some time; now it has every motivation to do even more as it burnishes its role as a good corporate citizen.
My macro prediction, in light of the frequency and increasing severity of data mishaps as well as minimal consequences for the companies involved (as evidenced by the SEC’s $35 million fine for the 2014 Yahoo email hack, which equates to only $0.07 per breached account), is that Facebook will not feel meaningful long-term financial impact from the Cambridge Analytica kerfuffle.
April 25 was about Facebook enjoying a respite from its problems and celebrating its success. Its next act will consist of delivering on its aspirations to become the world’s leading virtual reality platform. For now, the company has more immediate needs: proving that it can be an effective corporate citizen and highly profitable media platform at the same time.