Facebook is still making money hand over fist. Apparently there are people out there who think the social network should be making even more of it.
The tech giant showed yet again on Wednesday that its business is highly resilient to the near-constant drumbeat of negative headlines, calls for regulation and even actual regulation. Advertising revenue for the fourth quarter jumped 25% year over year, crossing the $20 billion mark for the first time.
The company also added about 34 million daily active users to the core Facebook service during the period. In this day and age that means finding 34 million people who have either never heard of the company’s numerous privacy missteps or simply don’t care.
But the results were only slightly ahead of Wall Street’s targets. And slightly ahead wasn’t enough given Facebook’s stock has surged more than 55% over the past 12 months: The shares fell 7% in after-hours trading.
The earnings report also was a sharp reminder of just how much Facebook now has to spend to improve the security of its network and possibly stay a step or two ahead of regulators.
Of course, Facebook has margins that many of its big-tech peers can only envy. It posted an operating margin of 34% for the full year.
But that was down sharply from 45% the year before and well off a peak of 50% in 2017. What’s more, total costs and expenses for the fourth quarter grew 34% year over year, versus 25% revenue growth for the same period.
And investors should expect spending to stay elevated for the foreseeable future. The coming U.S. presidential election alone will bring an unprecedented level of scrutiny, given the controversies that swirled around Facebook the last time involving foreign interference and misinformation.
Facebook has shown it can keep people coming in the door. But its days of earning 50 cents on the dollar are over.
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January 30, 2020 at 06:18AM
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Facebook Misses Some Social Cues - The Wall Street Journal
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