Facebook’s ongoing PR nightmare didn’t impact its quarterly earnings – yet again.
On Wednesday, Facebook reported $17.7 billion in revenue for the third quarter, up 28.6% year over year, beating the consensus by a cool $300 million. The company’s stock rose nearly 5% in after-hours trading.
Mark Zuckerberg kicked off the earnings call with a fervent monologue defending Facebook’s stance on free speech in political advertising. [You can read the whole thing here.]
“Some people accuse us of allowing this speech because they think all we care about is making money – that's wrong,” he declared. “I can assure you, from a business perspective, the controversy this creates far outweighs the very small percent of our business that these political ads make up.”
And: “In a democracy, I don't think it's right for private companies to censor politicians or the news.”
Less than 30 minutes before Facebook’s earnings call started, Twitter announced that it would prohibit all political advertising starting in November.
Yet not one analyst asked about political advertising on Facebook or Twitter’s political ad ban, although a few were curious for color about FB’s continued warning about forthcoming “ad targeting-related headwinds.”
The reason investors didn’t seem concerned about Zuckerberg’s earnest opener is simple: Facebook’s revenue machine just won’t quit, so they don’t have to care.
Ad revenue made up the lion’s share of overall revenue in Q3, clocking in at $17.4 billion (up 28% YoY), with mobile ad revenue composing most of that, at $16.4 billion (up 31% YoY).
Average revenue per user was $34.55 – a big rise from the $27.61 in ARPU Facebook reported at this time last year.
Use is also climbing. The number of daily active users increased 9% year on year to 1.62 billion, while monthly active users grew 8% to 2.45 billion. On average, 2.2 billion people use at least one Facebook service per day, whether that be the big blue app, Instagram, WhatsApp or Messenger.
Despite the solid quarter, Facebook has many big thorny issues to tackle, including election interference, misinformation and Facebook’s controversial policy for paid political ads.
Facebook put itself at the heart of a heated debate about free speech in political advertising. Facebook’s political ad policy, which allows elected officials and political candidates to run untrue or misleading ads on its platform, has rubbed everyone from lawmakers to its own employees the wrong way.
Although Facebook employees aren’t in open revolt, roughly 250 of them recently wrote a plaintive open letter to Zuckerberg criticizing the company’s stance on lying in political ads and calling for change. Sen. Mark Warner, D-VA, followed suit a few days ago with a letter to Zuck pushing him to reconsider the policy.
“From a business perspective, it might be easier for us to choose a different path than the one we're taking,” Zuckberg said. “[But] I don't think it's right for private companies to censor politicians or the news. And although I've considered whether we should not carry these ads in the past, and I’ll continue to do so, on balance so far I've thought we should continue.”
Clearly, though, that’s not a hill that Twitter or TikTok – the first large social platform to ban political ads earlier this month – want to die on. Avoid the responsibility, avoid the consequences. What say you, YouTube?
Other takeaways from Facebook’s Q3 call:
The number of ad impressions served across Facebook’s services increased 37% this quarter, driven largely by ads in the Facebook news feed, Instagram Stories and Instagram feed. The price per ad decreased by 6% due to the ongoing mix shift toward formats and geos that monetize at lower rates.
Facebook still expects some revenue deceleration and “ad targeting-related headwinds” thanks to global privacy regs, privacy-oriented changes being made by other mobile platforms and Facebook’s own privacy-focused products, such as Off-Facebook Activity. “The “majority of the potential signal loss is still in front of us rather than behind us,” said Facebook CFO Dave Wehner, “so those headwinds are still real and out there.”
Speaking of privacy regs, the California Consumer Privacy Act got a shoutout: “CCPA is still a work in progress,” Wehner said. “We’re watching the developments on that closely.”