Facebook reported strong first quarter earnings today, marking a bit of good news for a company that’s been challenged with a torrent of bad headlines, a Congressional testimony centered on its chief executive, and what has shaped up to be its largest existential crisis to date.
The Cambridge Analytica data privacy scandal came to light late in the first quarter, and therefore we won’t see if it had any substantial impact on Facebook’s business until next quarter. That said, the tech giant was able to recover from the daily active user slump it suffered last year, when its US and Canada DAU number shrank to 184 million and marked the first time Facebook usage has ever decreased in the company’s primary market. The slump was primarily attributable to Facebook’s tinkering with the News Feed to favor more meaningful interactions, which CEO Mark Zuckerberg said back in November was a long-term plan to improve the product and prevent more widespread abuse from bad actors.
This past quarter, Facebook added 49 million new daily active users for a total of 1.45 billion daily users, or a 3.5 percent increase compared to the previous quarter. The number of daily active users in the US and Canada also jumped back up to 185 million, following that historic downturn last quarter. The company posted revenue of $12 billion, which is a 50 percent jump year over year compared to last year’s $8 billion. Those metrics beat analyst expectations, and Facebook’s stock is up nearly seven percent in after-hours trading.
At the same time, Zuckerberg and Chief Operating Officer Sheryl Sandberg both gave reassurances about user data privacy while recognizing the harm done by the Cambridge Analytica scandal that’s affected over 87 million Facebook users, according to some estimates.
Zuckerberg opened up the earnings call by discussing the problems Facebook had weathered, including fake news and “app developers and data privacy.” He said the tech giant would do more to “make sure those tools are used for good.” Sandberg said that “we have always built privacy into our ads,” and that with the new European data privacy rules set to take effect on May 25th, as well as the new policies that Facebook has launched, users would be better protected against privacy violations.
Zuckerberg commented on his testimony in front of Congress, calling it an “important moment” to “answer all the questions about Cambridge Analytica and make sure this doesn’t happen again.” He said his team was working on better policies and ways to prevent foreign interference in elections, mentioning upcoming elections this year in Mexico and Brazil. Still, representatives say they haven’t received any responses yet from Zuckerberg for any of the numerous times he told Congressional members he and his team would “follow up” later.
Perhaps the only sign of problems in today’s earnings report can be found in Facebook’s growth metrics. Facebook’s number of daily users rose to 1.45 billion, up 13 percent year over year, and its monthly users are now 2.2 billion, also up 13 percent year over year. Yet those growth rates are particularly low when you compare them to Facebook’s first quarter results from last year, or to 2016 or 2015 rates.
In the first quarter of 2017, Facebook grew its daily active users by 18 percent, and in the first quarter of 2016, it grew that metric by 16 percent. Given the hashtag #DeleteFacebook was trending for some time when the Cambridge Analytica scandal began gaining steam at the tail end of the first quarter, the number of users turned off by Facebook and its approach to privacy could have been a factor into why Facebook’s user growth shrank.
Still, overall, Facebook showed strong results despite its current embattled reputation. The second quarter of 2018 should shine more light on whether the Cambridge Analytica situation has had a measurable impact on the company’s bottom line.
