Facebook CEO Mark Zuckerberg makes case for shift to video, Instagram

Ivan Schwartz
November 3, 2018

While revenue growth at 33% over the year ago period came in below targets, Zuckerberg reported on Facebook's earnings call that messaging services WhatsApp and Messenger, along with its Facebook Stories platform, have the potential for further monetization.

Revenues were $13.73 billion, about $40 million shy of analyst expectations.

Spending on security and election-related defenses were part of the reason overall costs and expenses reported in the quarter rose 53 percent to $7.95 billion from $5.2 billion a year earlier.

However, total global user numbers continue to slowly rise, with more than 2.2 billion people using the platform every month. It is also building a stable of original programming on Facebook Watch, its video service, to engage users, as well as working on efforts like an e-commerce marketplace, a jobs service and a dating service, he said.

Those scandals, along with Zuckerberg's previous warnings about decreased user engagement, had already wiped away huge gains for the company.

"The 1 million quarter-on-quarter decline in Europe users was likely a continuation of the fallout of GDPR we saw last quarter".

"I can't tell you just yet what that time frame is going to look like, but I think we're well positioned over the long-term because we're leading in stories and in basically every country", he said.

Facebook is keeping costs in check better than some investors anticipated but is facing challenges growing users, causing shares to swing in both directions after the third-quarter results.

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However, Zuckerberg acknowledged that ads in Stories don't make Facebook as much money as ads in News Feed, and revenue growth may be "slower" during the transition period, which he compared to the shift to mobile from desktop.

Zuckerberg and others had vowed that Facebook would change to deal with those problems.

Zuckerberg said that Facebook's problem is that users are gravitating towards features such as direct messaging and video viewing faster than it can find ways to place ads there while attracting clicks and not annoying users. Daily active users averaged 1.49 billion in September, up 9 per cent over last year's results. "Facebook has had more than its share of mishaps over the past year, with data scandals and accusations of bias, but this too shall pass", Clement Thibault, a senior analyst at Investing.com, said by email.

Zuckerberg said Watch has grown "about 3x in the last few months in the USA alone" and that the company has a "good sense" of how to make IGTV work well.

He warned investors that although he believes strongly in a "feed plus Stories" world over a "feed-only world", the Stories ads aren't driving much revenue yet.

2018 hasn't turned out to be a good year for Facebook.

In a call with investors, Zuckerberg said Facebook will keep pushing its service to be more private and secure.

When the company in July warned of slowing growth in its second-quarter earnings, Facebook shares suffered the biggest-ever one-day loss for a USA -listed company, with almost $120 billion lopped off from its market value. We started a roadmap, which we said was going to be about a three-year roadmap.

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