MENLO PARK, CA: The story of Facebook’s earnings calls has been predictable for some time: huge revenue growth, record profits. But in the last year, regulatory and attitudinal pressure from some of the social networks most mature markets has forced a variety of changes that will impact us all.
Following Facebook’s earnings call on Wednesday night, there was no doubt that the company Mark Zuckerberg founded in his Harvard dorm remains one of the dominant players in online advertising. With sales up to $13 bn in Q4, Facebook achieved a year on year increase of 47%. Its profits shot up 61% in the fourth quarter.
But the company is also adapting to its new found maturity. Following regulatory concern around Facebook’s sale of ads to potentially malicious actors during the 2016 presidential election, alongside the need to hire as many as 10,000 moderators in Q3, the social network finds itself in unfamiliar territory.
Indeed, Facebook’s new context sees the firm fall under the yoke of ‘Big’ industry, where its issues are now society’s issues. Facebook has been proactive in this regard.
As the startup has grown up, it has made changes. Sweeping changes to the News Feed earlier in January spooked the advertising and publishing industries. It also elected to deprioritise passive content in favour of “meaningful experiences”.
In the last quarter, the network showed users fewer viral videos, which played a part in reducing the collective time users spent on the platform by around 5% – 50 million hours a day.
Yet the company’s execs were optimistic. “I want to be clear: The most important driver of our business has never been time spent by itself. It’s the quality of the conversations and connections,” Zuckerberg told investors.
This thinking translates to the company’s ad strategy. “When you care about something, you're willing to see ads to experience it. But if you just come across a viral video then you're more likely to skip over it if you see an ad”, he added.
The price of individual ads increased in the quarter in accordance. Chief Financial Officer David Wehner told analysts that the average price per ad increased 43% since they last spoke.
While the company reported the first ever drop in North American daily active users – down 700,000 from a quarter earlier – the focus was elsewhere. Average revenue per user rose 26%, equating to almost $6 more revenue in the last quarter.
Such figures hint at a wily strategic decision, one that could solve some of the problems of monetising its other properties.
Asked how the company would define success in light of meaningful interactions, Zuckerberg explained “instead of just being focused on the content, now to be more focused on trying to measure and have people tell us what is creating the most meaningful interaction in their lives. We're not just on Facebook. It could be a message that you have on Messenger or Whatsapp.”
Though the challenges that Facebook faces are great, from outsmarting direct competitors to rebuilding trust among users, its near term strategy appears to prize the very thing that made many of us join up in the first place: conversations.
Sourced from Seeking Alpha, Financial Times, Reuters, TechCrunch, We Are Social/Hootsuite; additional content by WARC staff