Facebook Reports Net Income of $4.27 Billion in Q4 2017

Last Wednesday, when reporting Facebook’s fourth quarter and year-end 2017 financials, CEO Mark Zuckerberg said 2017 was a strong year for Facebook (NASDAQ: FB),

Subscription News: Facebook Reports Net Income of $4.27 Billion in Q4 2017

Source: Facebook

Last Wednesday, when reporting Facebook’s fourth quarter and year-end 2017 financials, CEO Mark Zuckerberg said 2017 was a strong year for Facebook (NASDAQ: FB), but admitted the company experienced plenty of challenges too. Financially speaking, the social media platform is on solid ground, reporting revenue of nearly $13.0 million, a 47 percent increase over 2016 revenue of $8.8 million. Advertising revenue represented the majority of revenue at $12.8 million. The company also reported net income of $4.3 million, of $1.44 diluted earnings per share, a 20 percent increase over 2016.

‘2017 was a strong year for Facebook, but it was also a hard one,’ said Mark Zuckerberg, Facebook founder and CEO in the earnings release. ‘In 2018, we’re focused on making sure Facebook isn’t just fun to use, but also good for people’s well-being and for society. We’re doing this by encouraging meaningful connections between people rather than passive consumption of content. Already last quarter, we made changes to show fewer viral videos to make sure people’s time is well spent. In total, we made changes that reduced time spent on Facebook by roughly 50 million hours every day. By focusing on meaningful connections, our community and business will be stronger over the long term.’

Here are some additional highlights from the earnings report:

  • Daily active users were 1.40 billion on average for December 2017, a 14 percent increase.
  • Monthly active users were 2.13 billion as of December 31, an increase of 14 percent.
  • Time spent on Facebook reduced by an estimated 50 million hours per day, or 5 percent.
  • Mobile advertising revenue was 89 percent of total revenue for Q4, compared to 84 percent in Q4 2016.
  • Employee headcount was 25,105 at year end, a 47 percent increase year-over-year.
  • Total revenue for 2017 was $40.7 billion compared to $27.6 billion in 2016.
  • Net income for 2017 was $15.9 billion, or $5.49 per share, compared to $10.2 billion, or $3.56 per share, in 2016.
  • The company has total assets of $84.5 billion, compared to $65.0 billion at the end of 2016.  

Subscription News: Facebook Reports Net Income of $4.27 Billion in Q4 2017

Source: Facebook

‘I’m proud of the progress our team has made and the ways Facebook is helping people around the world: giving people a voice who didn’t have one before, strengthening relationships by helping family and friends stay connected wherever they are, and enabling more than 70 million small businesses to grow and create more jobs,’ Zuckerberg said in a January 31 post.

To his credit, Zuckerberg admitted some of the challenges too including abuse on the platform, election tampering and the spread of fake news.

‘We have a responsibility to fully understand how are services are used, and to do everything we can to amplify the good and prevent harm,’ Zuckerberg added.

Here’s what we can expect from Facebook in 2018:

  • News feed changes: prioritizing personal social interactions between family and friends over news and other business posts.
  • Trusted news sources: Facebook will show more news from sources that are ‘broadly-trusted’ like the Wall Street Journal or New York Times. False news will be demoted.
  • Prevention of false news, hate speech and other abuse
  • Major ads transparency
  • Building video experiences that connect friends, family and groups via Watch and Watch Party
  • Growth of Stories
  • More ways for businesses to connect with customers via Messenger and WhatsApp
  • Use of artificial intelligence to understand the meeting of Facebook content

‘As I said last quarter, I expect these investments – on top of other investments we’re making – will significantly impact our profitability. But just like the changes we’re making that impact time spent, these investments will help us build a stronger community over the long term.’

After the earnings report, Facebook stock spiked slightly from $186.89 on Wednesday, January 31, the day of the earnings report, to $193.09 on Thursday, February 1. However, on Friday, February 2 in after-hours trading, stock dropped back to $190.28.

Subscription News: Facebook Reports Net Income of $4.27 Billion in Q4 2017

Source: Google

Insider Take:

Financially speaking, Facebook had a strong quarter and a stellar year, with increases in revenue, net income and assets. It dropped in terms of user hours, but in Zuckerberg’s January 31 post, he explained that the company doesn’t focus on user hours as a metric, and he anticipated traffic would drop as a result of news feed changes. Zuckerberg said he is more concerned with user interactions with each other.

It remains to be seen how the news feed changes and other Facebook’s other plans for 2018 will translate in terms of financial impact. It seems Zuckerberg wants to be magnanimous in improving how Facebook impacts our lives, but user and investors – as well as publishers and businesses whose posts are being deprioritized – may not see these changes as positive ones.

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