Published: Thu, April 26, 2018
Sci-tech | By Eric Barnett

Wall St to scour Facebook results for user defections after scandal

Wall St to scour Facebook results for user defections after scandal

The world's biggest social network added about 50 million users in the first quarter.

Profit in the first quarter of 2018 leapt 63% from a year ago to $5 billion, and total revenues increased 49% to $11.97 billion, Facebook said in an earnings update which topped most analyst forecasts.

Facebook's business model relies on allowing advertisers to use customers' data to better target them and using the revenue from these ads to keep the social network available for free.

But advertisers have shrugged off the scandals in the aggregate.

The audience gains were revealed as part of Facebook's first earnings report since news of the Cambridge Analytica data scandal surfaced last month and upended the company, shaving tens of billions off its market value. It reported 1.45 billion users who visit the site daily and 2.2 billion monthly users.

"The Cambridge Analytica controversy and a "#deleteFacebook" campaign have not hurt Facebook earnings - at least in the three months to March 31.

In the hours following the release of the first-quarter numbers, company shares climbed more than 5.5 percent to $168.50.

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The latest notice sent to Cambridge Analytica, which is accused of using data from Facebook to influence political elections in various nations, flagged the previous response from the firm as "cryptic and evasive" and sough additional details.

But it's tough not to view his comments in the context of the current backlash facing the company, including Facebook's role in spreading misinformation and the misuse of its users' private data.

The Australian Competition and Consumer Commission is now scrutinising the role of digital platforms in diverting advertising away from traditional media companies, as well as how much users know about the data being collected about them. Facebook also added almost 70 million global daily users compared with the previous quarter, pushing its global user base to 2.2 billion.

Facebook's stock has been battered over the Cambridge Analytica scandal, dropping nearly 18% in late March from its $185 pre-crisis peak.

David Wehner, Chief Financial Officer broke down a portion of those security and safety costs, telling analysts that the sales and marketing expense growth of 51% compared with the year-earlier quarter was driven by the "community operations investment". But he doesn't expect a major impact on Facebook revenue. He said the company was focused on growth and has no plans to scale back new ad-based product launches despite coming under fire from policymakers and privacy advocates. The question for analysts will be whether the declines are truly Facebook's own design or a reflection of user preference.

Stoked by fears that the data may have been used to try and influence elections in the United States and Europe and the discovery that Facebook collects a lot more data than the average person realises (including web browsing history and, in some cases, text messages), some users have started a #DeleteFacebook movement, including the co-founder of the Facebook-owned WhatsApp.

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