Facebook beats earnings forecast as user base grows

February 2, 2017 (3 weeks ago)
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The number of people using Facebook monthly increased 17 percent to 1.86 billion/AFP-File

, SAN FRANCISCO, United States, Feb 2 – Facebook’s profits more than doubled in the final three months of 2016, as the social media platform saw its audience grow and head towards the two billion mark.

The big jump in income announced Wednesday came despite controversy swirling around Facebook’s role in spreading fake news, and a Texas jury ordering the company to pay $500 million to a software firm that claims its virtual reality technology was stolen.

Overview
  • Income from ads on mobile devices accounted for about 84 percent of Facebook's overall advertising revenue in the final quarter of last year.
  • Facebook saw strong growth in Asia, with India being a hot market. The social network site still hopes to get into China, where the service is banned.

Facebook CEO Mark Zuckerberg has described virtual reality as one of the company’s important long-range investments.

In earnings that beat most forecasts, Facebook said it made a net profit of $3.7 billion on revenue of $8.6 billion in the fourth quarter, compared with profit of $1.6 billion on $5.6 billion in revenue in the same period a year earlier.

Meanwhile, the number of people using the Facebook each month increased 17 percent to 1.86 billion.

The ranks of people logging into the world’s leading social network site from mobile devices each month grew to 1.74 billion, a 21 percent increase from the same period a year earlier.

Income from ads on mobile devices accounted for about 84 percent of Facebook’s overall advertising revenue in the final quarter of last year.

Facebook saw strong growth in Asia, with India being a hot market. The social network site still hopes to get into China, where the service is banned.

“Our mission is to connect everyone in the world and it’s hard to do that over the long term if we don’t find a way to serve the more than billion people who live in China,” Zuckerberg said while answering questions from analysts on an earnings call.

Baird research analyst Colin Sebastian said in a note to investors that “few companies share Facebook’s combination of scale, strong technology orientation, and platform breadth/diversity.”

Facebook shares jumped more than two percent in after-market trades, returning to 15 cents above the closing price of $133.23 after chief financial officer David Wehner told analysts that the social network has run out of spare room for ads and plans to invest “aggressively.”

Company priorities include data centers, virtual reality, search and artificial intelligence.

AI has the potential to help find videos or other content people might like on Facebook, and to recognize and remove posts that violate community standards, according to Zuckerberg.

Stolen tech suit

Also on Wednesday, a Texas jury ordered Facebook and creators of its Oculus Rift to pay $500 million to gaming software firm ZeniMax in a lawsuit that claimed the virtual reality technology was stolen.

The lawsuit claimed Oculus founder Palmer Luckey and his colleagues developed the virtual reality gear using source code illegally obtained from the gaming firm.

ZeniMax had sought $4 billion in damages in the case, in which Zuckerberg testified to defend his company.

Facebook acquired Oculus in 2014 for more than $2 billion and last year began selling the Rift headsets as part of the social network’s push into virtual reality.

Maryland-based ZeniMax said it was “pleased” with the award, but Oculus said it plans to appeal the verdict.

Tackling hoaxes

Under pressure to stymie the spread of fake news, Facebook last month modified its system for showing trending topics.

The change is designed to ensure that trends reflect real world events being covered by multiple news outlets.

Zuckerberg has sought to deflect criticism that Facebook fueled the spread of misinformation that influenced the outcome of the 2016 US presidential race.

“We don’t write the news that you read but we want to be a place where people can access information and have meaningful conversations,” Zuckerberg said.

He said that Facebook is “approaching misinformation and hoaxes” the same way that they reduced spam and clickbait.

Facebook executives expected spending on investment and hiring by the California-based company to leap 50 percent or so from last year.

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