Facebook's rise in profits, users shows resilience after scandals

Facebook's rise in profits, users shows resilience after scandals

Facebook. (REUTERS/Dado Ruvic/Illustration/File Photo)

... as profits continue to grow at a rapid rate, investors will accept that higher spending to ensure privacy is warranted...
Washington (ANTARA News) - Facebook Inc shares rose on Wednesday after the social network reported a surprisingly strong 63 percent rise in profit and an increase in users, with no sign that business was hurt by a scandal over the mishandling of personal data.

The Cambridge Analytica scandal, affecting up to 87 million users and prompting several apologies from Chief Executive Mark Zuckerberg, generated calls for regulation and for users to leave the social network, but there was no indication advertisers immediately changed their spending.

"Everybody keeps talking about how bad things are for Facebook, but this earnings report to me is very positive, and reiterates that Facebook is fine, and they'll get through this," said Daniel Morgan, senior portfolio manager at Synovus Trust Company. His firm holds about 73,000 shares in Facebook.

Facebook`s quarterly profit beat analysts` estimates, as a 49 percent jump in quarterly revenue outpaced a 39 percent rise in expenses from a year earlier. The mobile ad business grew on a push to add more video content.

Facebook said monthly active users in the first quarter rose to 2.2 billion, up 13 percent from a year earlier and matching expectations, according to Thomson Reuters I/B/E/S.

The results are a bright spot for the world`s largest social network amid months of negative headlines about the company's handling of personal information, its role in elections and its fueling of violence in developing countries.

Facebook, which generates revenue primarily by selling advertising personalized to its users, has demonstrated for several quarters how resilient its business model can be as long as users keep coming back to scroll through its News Feed and watch its videos.

It is spending to ensure users are not scared away by scandals. Chief Financial Officer David Wehner told analysts on a call that expenses this year would grow between 50 percent and 60 percent, up from a prior range of 45 percent to 60 percent.

Much of Facebook's ramp-up in spending is for safety and security, Wehner said. The category includes efforts to root out fake accounts, scrub hate speech and take down violent videos.

Facebook said it ended the first quarter with 27,742 employees, up 48 percent from a year earlier.

"So long as profits continue to grow at a rapid rate, investors will accept that higher spending to ensure privacy is warranted," Wedbush Securities analyst Michael Pachter said.

The company declined to provide some details sought by analysts. It has not shared the revenue generated by Instagram, the photo-sharing app it owns, and it declined to provide details about time spent on Facebook. Facebook also owns the popular smartphone apps Messenger and WhatsApp.

Tighter regulation could make Facebook`s ads less lucrative by reducing the kinds of data it can use to personalize and target ads to users, although Facebook`s size means it could also be well positioned to cope with regulations.

Facebook and Alphabet Inc's Google together dominate the internet ad business worldwide. Facebook is expected to take 18 percent of global digital ad revenue this year, compared with Google`s 31 percent, according to research firm eMarketer.
 

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