Those memes showing Mark Zuckerberg as the Terminator are about to get a lot more relevant
Especially as Facebook’s Q2 earnings handily beat analyst expectations, despite a record $5 billion fine and two separate antitrust probes into the company. It is starting to look like nothing can kill the social media juggernaut. Even daily active user growth, which is soon to hit some mathematical barriers (namely, the population of the human species), is growing rapidly in the Asia-Pacific and Rest of the World segments. In fact, Facebook’s growth even beat out its own guidance - growth accelerated instead of slowing down.
What did the Q2 earnings say?
A lot, and nearly all of it positive. 8% daily and monthly active user growth, a 28% y-o-y revenue increase, and a whopping 49% year-over-year increase in net income. Facebook CEO Mark Zuckerberg stressed Facebook’s compliance with various privacy issues, including election security, and Facebook’s commitment to launching and supporting their Libra cryptocurrency. And the stock jumped 4.3% on the earnings beat.
8% daily and monthly active user growth, a 28% y-o-y revenue increase
Is there anything bad at all?
Well, the numbers look great. And the company’s guidance is cautious as it was last time. But if we look beyond the daily jump, then Facebook’s stock has actually lost 1.6% since Monday - consequences of another reveal in the earnings release of a second FTC investigation into the company. That makes two ongoing high-level investigations into the company (that are public) and considering the last one resulted in a $5 billion fine. The other two may have grave consequences for Facebook. Add to that the continuing uncertainty over Libra - CEO Zuckerberg mentioned that Libra may fail to launch at all - and Facebook may see some difficulties down the road.
Facebook’s stock has actually lost 1.6% since Monday
It’s hard to argue with success
And Facebook certainly has success in spades. Despite the criticism, fines, and investigations, the Facebook stock is up 56% since the start of the year, and despite flat or minor growth in North America and Europe, it is still gaining users at an astonishing pace for a now-mature technology company. And the FTC fine didn’t just end with money - Zuckerberg mentioned that as a result of the decision, privacy-related matters are being overhauled at Facebook to ensure greater accountability for top executives and better independent oversight of data security.
What We Think
Love it or hate it, Facebook is nearly omnipresent in our lives, either via the proliferation of Like and Share buttons or via the simple fact that almost everyone is on it. Of course, with great power comes great responsibility, and it remains to be seen whether Facebook’s leadership has the vision to see it through the regulatory headwinds - especially as it moves to launch a potential game-changer technology in Libra.
But, discounting all of that, one core fundamental remains - Facebook has a few billion users. And those users spend a lot of time on Facebook. And advertisers want some of that time spent on their ads. As long as that basic relationship exists, Facebook is going to keep growing.
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