A global data-privacy scandal and a US Congress investigation have failed to deter investors in Facebook, which continued to print money as investors flocked to the stock after a 50 percent surge in revenues and earnings per share.
Australian authorities launched an investigation into Facebook after it was recently revealed that over 300,000 Australians had been caught up in the Cambridge Analytica scandal, which saw the exploitation of tens of millions of users’ private data by a UK company involved in influencing the 2016 US presidential election.
The controversy led to a public mea-culpa from founder and CEO Mark Zuckerberg in front of the US Congress, and industry concerns about looming regulation and high-profile withdrawals by the likes of Elon Musk, who deleted the Facebook pages for Tesla and SpaceX.
Yet Facebook’s latest quarterly results showed no signs of slowing – with revenue surging 50 percent year-on-year, to $US11.97 billion ($A15.38b). Net income and earnings per share each jumped more than 62.5 percent, while the company’s headcount jumped 48 percent year-on-year.
Those figures suggest that advertisers have been unfazed by the controversy surrounding Facebook, and investors are taking a long view. RBC Capital Markets analyst Mark Mahaney, for one, has labelled the company’s stock a “must-buy for most consumer-oriented marketers”.
Key Facebook metrics suggest that users are still turning up in droves. Facebook recorded 2.20 billion monthly active users and 1.45 billion daily active users as of 31 March, jumping 13 percent compared with the same period a year ago.
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The results – which come despite what founder and CEO Mark Zuckerberg euphemistically called “important challenges” in the company’s growth – show the continuing appetite of advertisers to reach potential customers where they are interacting online.
And that, increasingly, means fighting for limited advertising space on mobile devices – which now account for 91 percent of all of Facebook’s advertising revenue, up from 85 percent a year ago.
The inexorability of this trend has led the company to make public steps of contrition, including the publication of guidelines for helping users take control of their Facebook information; plans to restrict data access on Facebook; improving the transparency of ads and pages; and making its privacy tools easier to find.
“We are taking a broader view of our responsibility and investing to make sure our services are used for good,” Zuckerberg said.
Yet Facebook has also been taking evasive actions in the runup to the globally-significant European Union general data protection regulation (GDPR), which will hit Facebook and every other company, with significant privacy and compliance obligations when it comes into effect on May 25.
Proposed changes to the company’s terms of service would, among other things, change the governing jurisdiction of non-European Facebook users away from its international headquarters in Ireland – where GDPR will apply. This move would effectively exclude over 1.5 billion Facebook users from the privacy protections afforded by GDPR – as well as its potential fines for breaches, which can reach 4 percent of global revenues.
Facebook’s global growth has been reflected in its Australian business, where revenue jumped 46 percent over the previous year – from $326m to $479m – despite a $31.3m tax adjustment imposed by the Australian Taxation Office (ATO). Last December, Facebook announced a “local selling structure” that would see it start paying taxes locally instead of routing all revenues through Ireland in a tax-minimisation structure.