Facebook's gain up 79% despite Russian scandal

A display showing a social media post for an ad being set up during a House Intelligence Committee hearing in Washington on Wednesday.
A display showing a social media post for an ad being set up during a House Intelligence Committee hearing in Washington on Wednesday.PHOTO: BLOOMBERG

WASHINGTON • Facebook faced harsh criticism in Washington on Wednesday over its failure to prevent Russian operatives from using its platform for election meddling, but the earnings report it issued hours later showed just how insulated its business remains from political risk.

The social network said its quarterly profit soared 79 per cent and revenues were up nearly 50 per cent in the third quarter as marketers poured money into Facebook's advertising offerings, whose power to target and influence users has actually been showcased by the election scandal.

Chief executive Mark Zuckerberg condemned Russia's attempts to influence last year's election through Facebook posts and advertisements designed to sow division, and repeated his pledge to ramp up spending to confront the problem.

He said that spending would include 10,000 additional people to review content on the network, though based on past practice, many of those people will be contractors. The spending would hit profits, Facebook said, with expenses expected to grow by 45 per cent to 60 per cent next year.

The company's share price, which hit a record US$182.90 earlier on Wednesday, initially rose in after-hours trading, but later fell into negative territory on discussion of the higher spending. Shares have gained almost 60 per cent this year.

"While the investigations into Russian activity on the platform have been getting a lot of attention, they're not detracting from Facebook's power as an ad platform," analyst Debra Aho Williamson of research firm eMarketer said.

Facebook's total advertising revenue rose 49 per cent in the third quarter to US$10.14 billion (S$13.8 billion), about 88 per cent of which came from mobile ads.

Analysts on average had expected total ad revenue of US$9.71 billion, according to data and analytics firm FactSet.

Facebook in the third quarter gave advertisers for the first time the ability to run ads in standalone videos, outside the Facebook News Feed, and the firm is seeing good early results, chief operating officer Sheryl Sandberg told analysts.

"Video is exploding, and mobile video advertising is a big opportunity," Ms Sandberg said.

More than 70 per cent of ad breaks up to 15 seconds long were viewed to completion, most with the sound on, she said.

Facebook has been warning for more than a year about reaching a limit in "ad load", or the number of ads the company can feature in users' pages before crowding their news feed.

Advertisers seem unfazed, though, spending heavily as the social network continues to attract users. The average price per ad rose 35 per cent.

The nearly 50 per cent jump in ad revenue "is phenomenal, especially when for the past few quarters they've been trying to bring that expectation way, way down. Yet it keeps going up", Tigress Financial Partners analyst Ivan Feinseth said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 03, 2017, with the headline 'Facebook's gain up 79% despite Russian scandal'. Print Edition | Subscribe