Facebook doubles revenues, triples profit in Q1; Zuckerberg to tighten control

New York:  Facebook is crushing it: the company nearly doubled revenue from last year, and tripled its profit. Facebook on Wednesday posted a 52 percent surge in first quarter revenue, bucking a gloomy tech trend that has seen Apple, Twitter, Microsoft and Google disappoint investors this earnings season.

Mark Zuckerberg

Mark Zuckerberg, Founder

The blowout results drove Facebook stock up more than 9 percent in after-hours trading to above $119.

In the first quarter, Facebook reported earnings per share, on a non-GAAP basis of 77 cents, significantly beating the consensus forecast for 62 cents. Revenue rose to $5.38 billion, just above the average analyst estimate for revenue of $5.3 billion, and up from $3.5 billion in the same quarter the year before. It made $1.51 billion in net income, a big jump from the $512 million it made in the same period last year.

Facebook Users Exploding in India, Brazil

The world's largest social network has 1.65 billion monthly active users, and nearly a billion people use Facebook on their mobile devices every day. People are spending a lot of time reading posts and watching videos.

Over the last two years, the bulk of Facebook’s user growth has come from outside the U.S., Canada and Europe in countries like India, Brazil, Indonesia and Mexico. As Facebook's second largest market, India is home to over 108 million users, behind the United States with over 151 million users, according to data from Facebook's advertising platform.

Facebook India Managing Director Kirthiga Reddy has steadily grown the numbers in India by innovating around live videos, 360 degree videos, and introducing formats that work on low-bandwidth phones. Facebook launched a special slide show ad unit format for India, which lets people take a series of pictures and play it like a video.

Facebook won't say how many people have completely left the service worldwide but quitting is evidently tougher than breaking most bad habits.

"It's like quitting smoking," said Matthew Milan, a 38-year-old marketing executive, who set up a website, QuitFacebookDay.com.

"It's easy to relapse — you have the habits, the experience, and the comfort of having it be a regular part of your life," added Milan.

Mobile Ad Sales Surge

At any rate, Facebook's 1.65 billion monthly users have pulled in the advertisers.

"Facebook and Instagram are the two most important mobile ad platforms out there," Facebook Chief Operating Officer Sheryl Sandberg, said during the company's quarterly earnings report.

And the numbers reflect that: Through the first three months of 2016 Facebook’s advertising revenue ballooned by 57 per cent year-over-year to hit $5.20 billion. And it’s mobile ad revenue rocketed at an even steeper clip, increasing by 76 per cent year-over-year to hit $4.26 billion and account for 82 percent of the period’s ad revenue.

Video ads are also gaining momentum in India as companies shift funds from their print and television budgets to pay for Facebook ads.

"We are seeing adoption of this format by large advertisers in India like Hindustan Unilever, as also small and medium businesses who use Facebook to reach people," Reddy told "Economic Times" ahead of the earnings announcement on Wednesday.

"We are helping brands use mobile videos to connect with their customers in a relevant way. Two of the brands that we worked with could see that the video platform was instrumental in increasing their reach; it was greater than what even television could do," said Reddy.

Facebook is now investing in Instagram and video to drive growth, while search and Facebook’s two messaging apps, Messenger and WhatsApp, are expected to power the company’s growth in five years. In 10 years, advanced projects in virtual reality and artificial intelligence will take center stage. Facebook launched the Oculus Rift headset last month, though a component shortage is delaying pre-orders.

Zuckerberg Tightens Control

Facebook announced it is proposing to create a new class of nonvoting capital stock, known as the Class C capital stock. The move is aimed at ensuring Facebook founder Mark Zuckerberg’s leadership role at the company while he pursues his charitable giveaways.

Zuckerberg’s voting control has fallen from 67.2 percent to 60.1 percent in the past two years. He pledged last December to give away 99 percent of his stock to fund health, education and environmental causes before he dies as part of the Chan Zuckerberg initiative launched with wife Priscilla.

On the earning's call, Zuckerberg built the case for the move arguing that being a “founder-led company” had helped Facebook focus on its mission.

“This structure has helped us resist the short-term pressures that often hurt companies,” said Facebook, pointing to his decision to turn down acquisition offers from the likes of Yahoo and to acquire Instagram for $1 billion, as moments when he was able to take risks that shareholders might have vetoed.

Zuckerberg’s salary remained $1, but the value of his total compensation —which includes security and travel expenses — fell 19 per cent to $5 million.

Meanwhile, Sheryl Sandberg saw the value of her total pay rise 20 percent to $18.7 million on the back of higher pay, bonus and security costs. Sandberg is so crucial to Facebook and its future that Facebook spent over $1.2 million to protect her by getting her a security detail.



Firstpost is now on WhatsApp. For the latest analysis, commentary and news updates, sign up for our WhatsApp services. Just go to Firstpost.com/Whatsapp and hit the Subscribe button.

Updated Date: Apr 28, 2016 12:09:03 IST

Also See