Facebook Inc reported a higher profit than expected on Wednesday. This showed that digital advertisers were still lining up to spend money on different services to reach customers even after the high profile embarrassing situations of the world’s largest social media platform.
Investors were worried whether Facebook’s decision to invest heavily in improving its security and privacy standards would slow down the company’s growth. However, the fourth quarter results of the company have soothed these concerns and boosted the stock price by more than 11 percent.
According to Haris Anwar, an analyst at Investing.com, the worst seems to be over the social media giant. Since the user engagement and ad business have not been affected by recent negative blows, investors can relax. The recent scandals regarding improperly shared customer data tarnished Facebook’s image last year. It was also made a target of political scrutiny all over the world.
However, this has not made a significant dent to advertising, where the company makes the majority of its revenue. Although ad prices have gone down, Facebook has increased the number of ads displayed, especially on its Instagram app. This app is used by people who crave visual updates from family, friends, and celebrities. The users are willing to sift through photo ads and commercials to see the updates from people they are following on the app. The number of ads across Facebook’s system has gone up each quarter, as the many moves aggressively to increase its revenue from Instagram. Initially, Facebook was a bit cautious for fear of losing its users.
The total fourth-quarter revenue of Facebook rose about thirty percent to $16.9 billion from $12.97 billion, which was its slowest quarterly revenue in the past 6 years as a public company. The quarter revenue was also higher than the forecasted average estimate of $16.4 billion. The share prices went up by $2.38 per share, making the net income $6.88 billion compared to $4.27 billion the previous year. Analysts had predicted earnings of up to $2.19 per share according to the IBES data released by Refinitiv.
According to George Salmon, chief analyst at Hargreaves Lansdown, these numbers are most reassuring, given recent history. Login trends in Europe have started improving after a few bad quarters. The current fourth quarter results will go a long way in helping Facebook regain the trust of Wall Street. Facebook executives mentioned that would be focusing on finding new strategies to push ads in the coming year.