Facebook Explores Payments And Commerce

Facebook’s (Nasdaq: FBbattle with privacy concerns are far from over. The company recently announced that it had settled a class action lawsuit by paying $550 million in fine, and it was also slapped with a $5 billion fine for privacy abuses by the Federal Trade Commission. Despite this, its quarterly results surpassed market expectations. Facebook is also looking at expanding its service offerings to e-commerce and payments to drive growth.

Facebook’s Financials

Facebook’s Q4 revenues grew 25% over the year to $21.08 billion, ahead of the market’s estimates of $20.87 billion. But the growth in revenue did not translate to similar growth in net income. Net income grew a modest 7% over the year to $7.3 billion. Non GAAP net income was $2.56 per share, ahead of the market’s forecast of $2.51 per share.

Facebook’s operating margins fell to 34% of the expenses from 45% a year ago. Its expenses grew 34% as it added significant headcount to manage privacy issues. Headcount grew 26% to 44,942, as it added over 1,000 engineers to work on privacy issues.

By segment, advertising revenues rose 33% to $20.74 billion. Ad impressions served rose 31%, driven by ads on Instagram Stories and Feed, and Facebook News Feed. However, average price per ad fell 5% due to a change in the mix toward Stories ads and in geographies where the monetization rate is low. Average Revenue per User grew 16% to $8.52. Revenues from Payments and other fees grew 26% to $346 million.

Among key metrics, Facebook had 1.66 billion daily active users during the quarter, growing 9% over the year. Monthly active users grew 8% to 2.5 billion. Facebook now has 2.26 billion users that use either Facebook, Messenger, Instagram, or WhatsApp each day, compared with 2.2 billion last quarter. Monthly users for the family of apps grew 9% to 2.89 billion.

This quarter, with its 25% growth rate, was the slowest quarter that Facebook has ever reported. And Facebook expects the growth to drop further in the first quarter of 2020. Facebook does not provide an outlook, but it mentioned that maturing business, the impact of global privacy regulation, and concerns about ad targeting will cause growth rates to further slow down in the coming quarter. Analysts were expecting Facebook to deliver revenues of $18.67 billion for the current quarter with an EPS of $1.96 and revenues of $85.76 billion for the current fiscal year with an EPS of $9.18.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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